Ford Motor Credit (FCZ) 10-Q 2007 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2007

OR

o 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 LLC

(Exact name of registrant as specified in its charter)

Delaware	38-1612444
(State of organization)	(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 Yeso 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 filero     Accelerated filero     Non-accelerated filerþ

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

o Yesþ No

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

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 41

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONSOLIDATED STATEMENT OF INCOME
		CONSOLIDATED BALANCE SHEET
		CONSOLIDATED STATEMENT OF SHAREHOLDER’S INTEREST/EQUITY
		CONSOLIDATED STATEMENT OF CASH FLOWS
		NOTES TO THE FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EXHIBIT INDEX
Exhibit 12
Exhibit 15
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended September 30, 2007 and 2006
(in millions)

	Third Quarter							Nine Months
	2007			2006				2007			2006
	(Unaudited)							(Unaudited)
Financing revenue
Operating leases	$	1,614		$	1,443			$	4,663		$	4,143
Retail		884			938				2,580			2,770
Interest supplements and other support costs earned from affiliated companies		1,186			901				3,378			2,483
Wholesale		515			607				1,607			1,848
Other		43			53				133			163
Total financing revenue		4,242			3,942				12,361			11,407
Depreciation on vehicles subject to operating leases		(1,596	)		(1,374	)			(4,521	)		(3,819	)
Interest expense		(2,149	)		(2,022	)			(6,464	)		(5,722	)
Net financing margin		497			546				1,376			1,866
Other revenue
Investment and other income related to sales of receivables		97			169				308			542
Insurance premiums earned, net		43			40				130			142
Other income, net		546			554		��		964			689
Total financing margin and other revenue		1,183			1,309				2,778			3,239
Expenses
Operating expenses		445			482				1,451			1,491
Provision for credit losses (Note 4)		173			66				301			64
Insurance expenses		19			31				74			137
Total expenses		637			579				1,826			1,692
Income from continuing operations before income taxes		546			730				952			1,547
Provision for income taxes		212			278				363			543
Income from continuing operations before minority interests		334			452				589			1,004
Minority interests in net income of subsidiaries		0			0				0			0
Net income	$	334		$	452			$	589		$	1,004

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

1

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in millions)

	September 30,		December 31,
	2007		2006
	(Unaudited)
ASSETS
Cash and cash equivalents (Note 1)	$	8,033	$	12,331
Marketable securities		4,626		10,161
Finance receivables, net (Note 2)		111,644		109,405
Net investment in operating leases (Note 3)		29,188		25,939
Retained interest in securitized assets		760		990
Notes and accounts receivable from affiliated companies		859		950
Derivative financial instruments (Note 8)		1,876		1,804
Other assets		5,259		5,752
Total assets	$	162,245	$	167,332
LIABILITIES AND SHAREHOLDER’S INTEREST/EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and other	$	1,862	$	1,509
Affiliated companies		2,760		3,648
Total accounts payable		4,622		5,157
Debt (Note 6)		133,108		139,740
Deferred income taxes		5,610		6,783
Derivative financial instruments (Note 8)		838		296
Other liabilities and deferred income		5,041		3,588
Total liabilities		149,219		155,564
Minority interests in net assets of subsidiaries		3		3
Shareholder’s interest/equity
Capital stock and paid-in surplus		—		5,149
Shareholder’s interest		5,149		—
Accumulated other comprehensive income		1,545		825
Retained earnings		6,329		5,791
Total shareholder’s interest/equity		13,023		11,765
Total liabilities and shareholder’s interest/equity	$	162,245	$	167,332

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

2

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER’S INTEREST/EQUITY
(in millions)

									Accumulated Other
									Comprehensive Income/(Loss)
	Capital
	Stock &			Share-					Unrealized			Foreign
	Paid-in			holder’s		Retained			Gain/(Loss)			Currency			Derivative
	Surplus			Interest		Earnings			on Assets			Translation			Instruments			Total
Balance at December 31, 2005	$	5,142		$	—	$	5,871		$	155		$	188		$	48		$	11,404
2006 comprehensive income/(loss) activity:
Net income		—			—		1,004			—			—			—			1,004
Value of retained interest in securitized assets,    net of tax		—			—		—			(14	)		—			—			(14	)
Change in marketable securities, net of tax		—			—		—			2			—			—			2
Foreign currency translation		—			—		—			—			376			—			376
Change in derivative instruments, net of tax		—			—		—			—			8			(31	)		(23	)
Total comprehensive income/(loss), net of tax		—			—		1,004			(12	)		384			(31	)		1,345
Cash dividends paid in 2006 and capital transactions		7			—		(963	)		—			—			—			(956	)
Balance at September 30, 2006 (Unaudited)	$	5,149		$	—	$	5,912		$	143		$	572		$	17		$	11,793
Balance at December 31, 2006	$	5,149		$	—	$	5,791		$	93		$	720		$	12		$	11,765
Adjustment for the adoption of FIN 48		—			—		(51	)		—			—			—			(51	)
Conversion of capital stock and paid-in surplus to    shareholder’s interest		(5,149	)		5,149		—			—			—			—			—
2007 comprehensive income/(loss) activity:
Net income		—			—		589			—			—			—			589
Value of retained interest in securitized assets,    net of tax		—			—		—			(27	)		—			—			(27	)
Change in marketable securities, net of tax		—			—		—			(18	)		—			—			(18	)
Foreign currency translation		—			—		—			—			777			—			777
Change in derivative instruments, net of tax		—			—		—			—			(1	)		(11	)		(12	)
Total comprehensive income/(loss), net of tax		—			—		589			(45	)		776			(11	)		1,309
Cash distributions/dividends paid in 2007 and capital transactions		—			—		—			—			—			—			—
Balance at September 30, 2007 (Unaudited)	$	—		$	5,149	$	6,329		$	48		$	1,496		$	1		$	13,023

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

3

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended September 30, 2007 and 2006
(in millions)

	Nine Months
	2007			2006
	(Unaudited)
Cash flows from operating activities
Net income	$	589		$	1,004
Adjustments to reconcile net income to net cash provided by operations
Provision for credit losses		301			64
Depreciation and amortization		4,947			4,064
Net gain on sales of finance receivables		(5	)		(84	)
Net change in deferred income taxes		(1,151	)		197
Net change in other assets		195			179
Net change in other liabilities		790			401
All other operating activities		314			417
Net cash provided by operating activities		5,980			6,242
Cash flows from investing activities
Purchase of finance receivables (other than wholesale)		(30,111	)		(35,871	)
Collection of finance receivables (other than wholesale)		28,073			26,933
Purchase of operating lease vehicles		(12,616	)		(11,963	)
Liquidation of operating lease vehicles		6,018			4,842
Net change in wholesale receivables		2,202			6,251
Net change in retained interest in securitized assets		291			525
Net change in notes receivable from affiliated companies		153			24
Proceeds from sales of receivables and retained interests		697			3,956
Purchases of marketable securities		(7,657	)		(13,830	)
Proceeds from sales and maturities of marketable securities		13,336			11,101
Proceeds from sale of business		157			—
Net change in derivatives		(33	)		82
All other investing activities		24			22
Net cash provided by/(used in) investing activities		534			(7,928	)
Cash flows from financing activities
Proceeds from issuance of long-term debt		23,393			32,151
Principal payments on long-term debt		(31,633	)		(32,379	)
Change in short-term debt, net		(2,224	)		(697	)
Cash distributions/dividends paid		—			(950	)
All other financing activities		(48	)		(59	)
Net cash used in financing activities		(10,512	)		(1,934	)
Effect of exchange rate changes on cash and cash equivalents		(300	)		228
Net change in cash and cash equivalents		(4,298	)		(3,392	)
Cash and cash equivalents, beginning of period		12,331			14,798
Cash and cash equivalents, end of period	$	8,033		$	11,406

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

4

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. GENERAL AND ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments necessary for a fair statement of the results of operations and financial conditions for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries and consolidated variable interest entities (“VIEs”) in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit”, “we”, “our” or “us”). Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2006 (“2006 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”).

Conversion to Limited Liability Company

Effective May 1, 2007, we converted our form of organization from a Delaware corporation to a Delaware limited liability company (“LLC”) and changed our name to “Ford Motor Credit Company LLC”. The purpose of converting from a corporation to a limited liability company is to enable us to operate our business in a more tax efficient manner. This conversion had no material impact on our results of operations or financial condition.

For periods subsequent to the conversion to an LLC, our federal and state income tax liabilities are determined under a tax sharing agreement with Ford. Income tax expense is generally calculated as if we file our own federal and state income tax returns as an entity taxable as a corporation.

Receivable Classification

Receivables are accounted for as held-for-investment (“HFI”) if management has the intent and ability to hold the receivables for the foreseeable future or until maturity or payoff. Receivables that are classified as HFI are recorded at cost. The determination of intent and ability for the foreseeable future at origination is highly judgmental and requires management to make good faith estimates based on all information available at the time. Once a decision has been made to sell specific receivables not previously classified as held-for-sale (“HFS”), such receivables are transferred into the HFS classification and carried at the lower of cost or fair value. Any amount by which cost exceeds fair value is accounted for as a valuation allowance offset to income. We use internally developed quantitative methods to determine fair value that incorporate appropriate funding pricing and enhancement requirements, as well as estimates concerning credit losses and prepayments.

Regardless of receivable classification, retained interests related to sold receivables are classified and accounted for as available-for-sale securities. The initial receipt of retained interests represents a non-cash transfer and subsequent cash flows related to repayment of the retained interests is recorded as an investing activity.

We classify receivables on a receivable-by-receivable basis. Specific receivables included in off-balance sheet securitizations or whole-loan sale transactions are generally not identified until the month in which the sale occurs. Each quarter we make a determination of whether it is probable that receivables originated during the quarter will be held for the foreseeable future based on historical receivable sale experience, internal forecasts and budgets, as well as other relevant, reliable information available through the date of evaluation. For purposes of this determination, we define probable to mean at least 70% likely and, consistent with our budgeting and forecasting period, we define foreseeable future to mean 12 months. We also consider off-balance sheet funding channels in connection with our quarterly receivable classification determination.

5

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. GENERAL AND ACCOUNTING POLICIES — Continued

Held-For-Investment

Finance receivables originated during the quarter for which we determine that it is probable we will hold for the following twelve months are classified as HFI and carried at amortized cost. Beginning in November 2005, all wholesale receivables are classified as HFI at origination. Prior to November 2005, certain wholesale receivables were originally classified as HFS because we had committed to sell these receivables to an off-balance sheet trust. All retail receivables are classified as HFI at origination during all periods presented. Cash flows resulting from the purchase of these receivables that are originally classified as HFI are recorded as an investing activity. Once a decision has been made to sell specifically identified receivables that were originally classified as HFI and the receivables are sold in the same reporting period, the receivables are reclassified as HFS and simultaneously removed from the balance sheet. The fair value adjustment is incorporated and recognized in the net gain on sale of receivables component in theInvestment and other income related to sales of receivablesline in the income statement. If the receivables have been selected for an off-balance sheet transaction that has not occurred at the end of the reporting period, the receivables are reclassified as HFS and a valuation adjustment is recorded inOther incometo recognize the receivables at the lower of cost or fair value. Cash flows resulting from the sale of the receivables that were originally classified as HFI are recorded as an investing activity since GAAP requires the statement of cash flow presentation to be based on the original classification of the receivables. SeeProceeds from sales of receivables and retained interestsin Note 7 to the financial statements in our 2006 10-K Report for details on the proceeds from the sale of receivables that were originally classified as HFI.

Held-For-Sale

Finance receivables originated during the quarter for which we determine that it is not probable we will hold for the following twelve months are classified as HFS and carried at the lower of cost or fair value. Cash flows resulting from the purchase of these receivables are recorded as an operating activity. The valuation adjustment, if applicable, is recorded inOther incometo recognize the receivables at the lower of cost or fair value. Once specifically identified receivables that were originally classified as HFS are sold, the receivables are removed from the balance sheet and the fair value adjustment is incorporated into the book value of receivables for purposes of determining the gain on sale. Cash flows resulting from the sale of the receivables that were originally classified as HFS are recorded as an operating activity. As a result of our accounting for any retained interest related to sold receivables as available-for-sale securities, there will be a net operating cash outflow impact for these receivables since the cash flows related to the retained interest will be classified as investing cash inflows.

Cash for On-Balance Sheet Securitizations

The cash balances to be used only to support on-balance sheet securitizations were $4.4 billion and $3.7 billion at September 30, 2007 and December 31, 2006, respectively. These balances are generally held by VIEs of which we are the primary beneficiary and are included inCash and cash equivalents.

Other Income

Other income, netconsists primarily of investment income and gains/losses related to market valuation adjustments from derivatives. Investment income, which includes primarily income related to cash, cash equivalents and marketable securities, was $206 million and $197 million in the third quarter of 2007 and 2006, respectively, and $723 million and $548 million in the first nine months of 2007 and 2006, respectively. Additional financial information regarding derivatives is shown in Derivative Financial Instruments and Hedging Activities, Note 8.

6

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES

Net finance receivables at September 30, 2007 and December 31, 2006 were as follows (in millions):

	September 30,			December 31,
	2007			2006
	(Unaudited)
Retail	$	75,124		$	71,347
Wholesale		34,023			35,227
Other		3,372			3,815
Total finance receivables, net of unearned income (a)(b)		112,519			110,389
Less: Allowance for credit losses		(875	)		(984	)
Finance receivables, net	$	111,644		$	109,405

(a)

At September 30, 2007 and December 31, 2006, includes $1.8 billion and $1.9 billion, respectively, of primarily wholesale receivables with entities that are reported as consolidated subsidiaries of Ford. The consolidated subsidiaries include dealerships that are partially owned by Ford and consolidated as VIEs and also certain overseas affiliates. The associated vehicles that are being financed by us are reported as inventory on Ford’s balance sheet.

(b)

At September 30, 2007 and December 31, 2006, includes finance receivables of $58.8 billion and $56.5 billion, respectively, that have been sold for legal purposes in securitizations that do not satisfy the requirements for accounting sale treatment. These receivables are available only for payment of the debt or other obligations issued or arising in the securitization transactions; 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, 2007 and December 31, 2006 were as follows (in millions):

	September 30,			December 31,
	2007			2006
	(Unaudited)
Vehicles, at cost, including initial direct costs	$	37,142		$	33,012
Less: Accumulated depreciation		(7,818	)		(6,947	)
Less: Allowance for credit losses		(136	)		(126	)
Net investment in operating leases (a)	$	29,188		$	25,939

(a) At September 30, 2007 and December 31, 2006, includes net investment in operating leases of $17.1 billion and $15.2 billion, respectively, that have been included in securitizations that do not satisfy the requirements for accounting sale treatment. These net investment in operating leases are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors.

7

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC 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
	2007			2006			2007			2006
	(Unaudited)						(Unaudited)
Balance, beginning of period	$	1,010		$	1,360		$	1,110		$	1,586
Provision for credit losses		173			66			301			64
Deductions
Charge-offs before recoveries		282			250			755			695
Recoveries		(98	)		(110	)		(339	)		(361	)
Net charge-offs		184			140			416			334
Other changes, principally amounts related to finance    receivables sold and translation adjustments		(12	)		19			(16	)		49
Net deductions		172			159			400			383
Balance, end of period	$	1,011		$	1,267		$	1,011		$	1,267

NOTE 5. VARIABLE INTEREST ENTITIES

We consolidate VIEs in which we are the primary beneficiary. We use special purpose entities (“SPEs”) that are considered VIEs for most of our on-balance sheet securitizations. 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. Consolidated VIE assets of $73.1 billion and $69.5 billion are included in our balance sheet at September 30, 2007 and December 31, 2006, respectively. These consolidated VIE assets include $4.3 billion and $3.7 billion of cash and cash equivalents and $68.8 billion and $65.8 billion of receivables and beneficial interests in net investment in operating leases at September 30, 2007 and December 31, 2006, respectively.

We have investments in other entities determined 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 ($72 million and $182 million at September 30, 2007 and December 31, 2006, 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; these SPEs are not consolidated by us. All of these sales constitute sales for legal purposes, but some of the sales do not satisfy the requirements for accounting sale treatment. The outstanding balance of these finance receivables was approximately $4.0 billion and $5.2 billion at September 30, 2007 and December 31, 2006, respectively.

8

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 6. DEBT

At September 30, 2007 and December 31, 2006, debt was as follows (in millions):

	Interest Rates
	Average						Weighted-
	Contractual (a)						Average (b)						September 30,			December 31,
	2007			2006			2007			2006			2007			2006
													(Unaudited)
Short-term debt
Asset-backed commercial paper (c)		5.7	%		5.4	%							$	12,061		$	16,480
Other asset-backed short-term debt (c)		5.8	%		5.7	%								5,215			1,197
Ford Interest Advantage (d)		6.1	%		6.1	%								5,331			5,611
Unsecured commercial paper		7.5	%		6.7	%								541			400
Other short-term debt (e)		6.8	%		5.8	%								1,053			2,142
Total short-term debt		5.9	%		5.6	%		6.0	%		5.8	%		24,201			25,830
Long-term debt
Senior indebtedness
Notes payable within one year														12,616			17,256
Notes payable after one year (f)														51,955			54,874
Unamortized discount														(94	)		(103	)
Asset-backed debt (c)
Notes payable within one year														19,751			17,330
Notes payable after one year														24,679			24,553
Total long-term debt (g)		6.4	%		6.1	%		6.2	%		5.9	%		108,907			113,910
Total debt		6.3	%		6.0	%		6.2	%		5.9	%	$	133,108		$	139,740

(a)	Third quarter 2007 and fourth quarter 2006 average contractual rates exclude the effects of derivatives and facility fees.
(b)	Third quarter 2007 and fourth quarter 2006 weighted-average rates include the effects of derivatives and facility fees.
(c)	Obligations issued in securitizations that are payable only out of collections on the underlying securitized assets and related enhancements.
(d)	The Ford Interest Advantage program consists of our floating rate demand notes.
(e)	Includes $53 million and $27 million with affiliated companies at September 30, 2007 and December 31, 2006, respectively.
(f)	Includes $154 million and $150 million with affiliated companies at September 30, 2007 and December 31, 2006, 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.

9

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 7. INCOME TAXES

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation Number 48,Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,Accounting for Income Taxes(“FIN 48”). The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods, and thus requires increased disclosures.

We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, we recorded a $51 million decrease to our retained earnings. The amount of unrecognized tax benefits at January 1, 2007 is $363 million, of which $107 million would affect our effective tax rate, if recognized.

We join in the filing of Ford’s U.S. federal consolidated income tax return. We have settled our U.S. federal income tax deficiencies related to tax years prior to 2004 in accordance with our intercompany tax sharing agreement with Ford. The consolidated return is currently under examination for the 2004 and 2005 tax years.

Examinations by tax authorities have been completed through 1999 in Germany, 2000 in Canada, and 2003 in the United Kingdom.

Effective with the adoption of FIN 48, we have elected to recognize accrued interest expense related to unrecognized tax benefits in jurisdictions where we file tax returns separate from Ford and income tax related penalties in theProvision for income taxes. As of January 1, 2007, we had recorded a liability of approximately $8 million for the payment of interest.

10

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to interest rate changes and foreign currency exchange rate fluctuations in the normal course of business. As part of our risk management strategy we use various derivatives, including interest rate swaps, cross currency swaps and forward contracts to mitigate our risk exposure to interest rates and currency exchange rates. In 2007, we have elected not to apply hedge accounting to these derivatives. Refer to our 2006 10-K Report for a more detailed description of our derivative financial instruments and hedge accounting designations.

Income Statement Effect of Derivative Instruments

The following table summarizes the estimated pre-tax gains / (losses) for each type of hedge designation (in millions):

	Third Quarter						Nine Months						Income Statement
	2007			2006			2007			2006			Classification
	(Unaudited)						(Unaudited)
Fair value hedges
Ineffectiveness	$	—		$	1		$	—		$	10		Other income
Net interest settlements and accruals excluded from the assessment of hedge effectiveness		—			4			—			16		Interest expense
Foreign exchange revaluation adjustments excluded from the assessment of hedge effectiveness (a)(b)		—			13			—			78		Other income
Derivatives not designated as hedging instruments
Interest rate swaps		257			275			35			(167	)	Other income
Foreign currency swaps and forward contracts (a)		(47	)		(138	)		(497	)		(182	)	Other income
Other		0			—			0			—		Other income

(a)	These gains/(losses) were related to foreign currency derivatives and were substantially offset by net revaluation impacts on foreign denominated debt, which were recorded to the same income statement line item as the hedge gains/(losses).
(b)	Represents the portion of the derivative’s fair value attributable to the change in foreign currency exchange rates.

Balance Sheet Effect of Derivative Instruments

The following table summarizes the estimated fair value of our derivative financial instruments, taking into consideration the effects of legally enforceable netting agreements, which allow us to settle positive and negative positions with the same counterparty on a net basis:

	September 30, 2007								December 31, 2006
	(Unaudited)
			Fair			Fair					Fair			Fair
			Value			Value					Value			Value
	Notional		Assets			Liabilities			Notional		Assets			Liabilities
	(in billions)		(in millions)						(in billions)		(in millions)
Fair value hedges	$	—	$	—		$	—		$	1	$	111		$	1
Derivatives not designated as hedging instruments (a)		178		2,236			1,198			158		2,334			936
Impact of netting agreements		—		(360	)		(360	)		—		(641	)		(641	)
Total derivative financial instruments	$	178	$	1,876		$	838		$	159	$	1,804		$	296

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

11

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 9. OTHER ACTIONS

Employee Separation Actions

In the first nine months of 2007, we recognized pre-tax charges of $43 million inOperating expensesprimarily for employee separation actions (excluding costs for retirement plan and postretirement health care and life insurance benefits) announced in 2006 in the United States and in the first quarter of 2007 in Canada. These actions were associated with our business transformation initiative to consolidate branches into our existing service centers in North America. In addition, in the first nine months of 2007, we incurred charges of $71 million for retirement plan and postretirement health care and life insurance benefits related to these actions. Refer to our 2006 10-K Report for a more detailed description of our employee separation actions.

Sale of Business

During the third quarter of 2007, we sold a majority of our interest in AB Volvofinans, an unconsolidated subsidiary that finances the sale of Volvo and Renault vehicles through Volvo dealers in Sweden. As a result of the transaction, we received $157 million as proceeds from the sale and recognized a pre-tax gain of $51 million reported inOther Income, net.

12

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC 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 of gains and losses related to market valuation adjustments from derivatives primarily related to movements in interest rates. 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		Inter-		Unallocated		Effect of
	America		national		Risk		Sales of
	Segment		Segment		Management		Receivables			Total			Total
	(Unaudited)
Third Quarter 2007
Revenue (a)	$	3,818	$	978	$	205	$	(73	)	$	132		$	4,928
Income
Income from continuing operations before income taxes		219		122		205		—			205			546
Provision for income taxes		98		42		72		—			72			212
Income from continuing operations		121		80		133		—			133			334
Other disclosures
Depreciation on vehicles subject to operating leases		1,516		80		—		—			—			1,596
Interest expense		1,654		586		—		(91	)		(91	)		2,149
Provision for credit losses		137		36		—		—			—			173
Third Quarter 2006
Revenue (a)	$	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

(a) Total Revenue representsTotal financing revenue, Investment and other income related to sales of receivables, Insurance premiums earned, netandOther income, net.

13

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 10. SEGMENT INFORMATION (Continued)

						Unallocated/Eliminations
	North			Inter-		Unallocated			Effect of
	America			national		Risk			Sales of
	Segment			Segment		Management			Receivables			Total			Total
	(Unaudited)
First Nine Months 2007
Revenue (a)	$	11,325		$	2,880	$	(148	)	$	(294	)	$	(442	)	$	13,763
Income
Income from continuing operations before income taxes		651			449		(148	)		—			(148	)		952
Provision for income taxes		258			157		(52	)		—			(52	)		363
Income from continuing operations		393			292		(96	)		—			(96	)		589
Other disclosures
Depreciation on vehicles subject to operating leases		4,288			233		—			—			—			4,521
Interest expense		5,099			1,687		—			(322	)		(322	)		6,464
Provision for credit losses		234			67		—			—			—			301
Finance receivables and net investment in operating leases		108,383			40,061		1			(7,613	)		(7,612	)		140,832
Total assets		123,700			45,397		1			(6,853	)		(6,852	)		162,245
First Nine Months 2006
Revenue (a)	$	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 and 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

(a) Total Revenue representsTotal financing revenue, Investment and other income related to sales of receivables, Insurance premiums earned, netandOther income, net.

14

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 11. GUARANTEES AND INDEMNIFICATIONS

The fair values of guarantees and indemnifications issued are recorded in the financial statements and are not material.

At September 30, 2007, the following guarantees and indemnifications were issued and outstanding:

Guarantees of certain obligations of unconsolidated affiliates and third parties: In some cases, we have guaranteed debt and other financial obligations of unconsolidated affiliates, including Ford and joint ventures, and certain third parties. Expiration dates vary, and guarantees will terminate on payment and/or cancellation of the obligation. A payment would be triggered by failure of the guaranteed party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from Ford or an affiliate of Ford amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full. The maximum potential payments under these guarantees totaled $516 million; of this amount, $143 million was counter-guaranteed by Ford to us. 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 2007, there were no significant changes to our indemnifications.

15

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

Results of Operations

Third Quarter 2007 Compared with Third Quarter 2006

In the third quarter of 2007, net income was $334 million, down $118 million compared with a year ago. On a pre-tax basis from continuing operations, we earned $546 million in the third quarter of 2007, down $184 million compared with a year ago.

The decrease in pre-tax earnings primarily reflected, each with about a $100 million impact:

• A higher provision for credit losses primarily related to the non-recurrence of credit loss reserve reductions;

• Unfavorable lease residual performance reflected in higher depreciation expense for leased vehicles; and

• Lower financing margin primarily related to higher borrowing costs.

These factors were offset partially by:

• A gain related to the sale of a majority of our interest in AB Volvofinans, and lower operating costs (total about $100 million).

In the third quarter of 2007 and 2006, pre-tax earnings included net gains related to market valuation adjustments from derivatives (unallocated risk management in the table below) in the amounts of $205 million and $209 million, respectively.

The following table shows the results of our operations by business segment for the third quarter of 2007 and 2006.

	Third Quarter
							2007
							Over/(Under)
	2007			2006			2006
	(in millions)
Income from continuing operations before income taxes
North America segment	$	219		$	366		$	(147	)
International segment		122			155			(33	)
Unallocated risk management		205			209			(4	)
Income from continuing operations before income taxes		546			730			(184	)
Provision for income taxes and minority interests		(212	)		(278	)		66
Total net income	$	334		$	452		$	(118	)

The decrease in North America segment pre-tax earnings primarily reflected higher provision for credit losses primarily related to lower credit loss reserve reductions and unfavorable lease residual performance as reflected in higher depreciation expense for leased vehicles. These factors were offset partially by lower expenses, primarily reflecting improved operating costs.

The decrease in International segment pre-tax earnings primarily reflected lower financing margin primarily reflecting higher borrowing costs. This was offset partially by a gain related to the sale of a majority of our interest in AB Volvofinans.

For additional information on our unallocated risk management business segment, see Note 10 of our Notes to the Financial Statements.

16

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

First Nine Months 2007 Compared with First Nine Months 2006

In the first nine months of 2007, net income was down $415 million compared with a year ago. Our income from continuing operations before income taxes was down $595 million.

The decrease in pre-tax earnings primarily reflected:

• Lower financing margin primarily related to higher borrowing costs (about $400 million);

• Unfavorable lease residual performance reflected in higher depreciation expense for leased vehicles (about $300 million);

• A higher provision for credit losses primarily related to lower credit loss reserve reductions (about $200 million); and

• Higher other costs primarily due to our North American business transformation initiative (about $100 million).

These factors were offset partially by:

• Lower net losses related to market valuation adjustments from derivatives (about $200 million); and

• Lower expenses primarily reflecting improved operating costs (about $200 million).

In the first nine months of 2007 and 2006, pre-tax earnings included net losses related to market valuation adjustments from derivatives (unallocated risk management in the table below) in the amounts of $148 million and $377 million, respectively.

Results of our operations by business segment for the first nine months of 2007 and 2006 are shown below.

	First Nine Months
							2007
							Over/(Under)
	2007			2006			2006
	(in millions)
Income from continuing operations before income taxes
North America segment	$	651		$	1,385		$	(734	)
International segment		449			539			(90	)
Unallocated risk management		(148	)		(377	)		229
Income from continuing operations before income taxes		952			1,547			(595	)
Provision for income taxes and minority interests		(363	)		(543	)		180
Total net income	$	589		$	1,004		$	(415	)

The decrease in North America segment pre-tax earnings primarily reflected unfavorable lease residual performance as reflected in higher depreciation expense for leased vehicles, lower financing margin primarily related to higher borrowing costs, higher provision for credit losses primarily related to lower credit loss reserve reductions and the costs associated with our business transformation initiative. These factors were offset partially by lower expenses, primarily reflecting improved operating costs.

The decrease in International segment pre-tax earnings primarily reflected lower financing margin primarily reflecting higher borrowing costs, offset partially by a gain related to the sale of a majority of our interest in AB Volvofinans, a lower provision for credit losses, favorable currency exchange rates and lower operating costs.

The change in unallocated risk management income reflected lower net losses related to market valuation adjustments from derivatives primarily related to movements in interest rates.

17

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
	2007		2006		2007		2006
	(in thousands)
North America Segment
United States		349		471		1,008		1,312
Canada		54		55		148		146
Total North America segment		403		526		1,156		1,458
International Segment
Europe		170		173		541		540
Other international		53		60		159		181
Total International segment		223		233		700		721
Total contract placement volume		626		759		1,856		2,179

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
	2007			2006			2007			2006
United States
Financing share — Ford, Lincoln and Mercury
Retail installment and lease		45	%		56	%		39	%		48	%
Wholesale		79			80			79			80
Europe
Financing share — Ford
Retail installment and lease		26	%		28	%		26	%		26	%
Wholesale		95			95			96			95

North America Segment

In the third quarter of 2007, our total contract placement volumes were 403,000, down 123,000 contracts from a year ago. This decrease primarily reflected lower sales of new Ford, Lincoln and Mercury vehicles, lower used vehicle contract volumes and our lower U.S. Ford, Lincoln and Mercury financing share. This lower financing share is primarily due to changes in the types of Ford’s marketing programs that emphasized to a greater degree in 2006 the use of special-rate financing through us.

In the first nine months of 2007, our total contract placement volumes were 1,156,000, down 302,000 contracts from a year ago, reflecting the causal factors described above.

International Segment

In the third quarter of 2007, our total contract placement volumes were 223,000, down 10,000 contracts from a year ago. The decrease primarily reflected lower volumes in Latin America and Europe.

In the first nine months of 2007, our total International contract placement volumes were 700,000, down 21,000 contracts from a year ago. The decrease primarily reflected lower volumes in Latin America and Asia Pacific.

18

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

Financial Condition

Finance Receivables and Operating Leases

Our receivable levels are shown below:

	September 30,		December 31,
	2007		2006
	(in billions)
Receivables
On-Balance Sheet
Finance receivables
Retail installment	$	74.3	$	70.4
Wholesale		34.0		35.2
Other		3.3		3.8
Total finance receivables, net		111.6		109.4
Net investment in operating leases		29.2		25.9
Total on-balance sheet*	$	140.8	$	135.3
Memo: Allowance for credit losses included above	$	1.0	$	1.1
Securitized Off-Balance Sheet
Finance receivables
Retail installment	$	7.6	$	12.2
Wholesale		—		—
Other		—		—
Total finance receivables		7.6		12.2
Net investment in operating leases		—		—
Total securitized off-balance sheet	$	7.6	$	12.2
Managed
Finance receivables
Retail installment	$	81.9	$	82.6
Wholesale		34.0		35.2
Other		3.3		3.8
Total finance receivables, net		119.2		121.6
Net investment in operating leases		29.2		25.9
Total managed	$	148.4	$	147.5
Serviced	$	149.5	$	149.5

* At September 30, 2007 and December 31, 2006, includes finance receivables of $58.8 billion and $56.5 billion, respectively, that have been sold for legal purposes in securitizations that do not satisfy the requirements for accounting sale treatment. In addition, at September 30, 2007 and December 31, 2006, includes net investment in operating leases of $17.1 billion and $15.2 billion, respectively, that have been included in securitizations that do not satisfy the requirements for accounting sale treatment. These underlying securitized assets are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors.

Managed Receivables increased from year-end 2006, primarily reflecting changes in currency exchange rates and higher U.S. net investment in operating leases, offset partially by lower U.S. retail installment and wholesale receivables.

19

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

At September 30, 2007, in the United States and Canada, Ford is obligated to pay us $5.5 billion of interest supplements (including supplements related to sold receivables) and about $900 million of residual value support over the terms of the related finance contracts compared with $5.2 billion and about $900 million at June 30, 2007 and $4.6 billion and about $900 million at December 31, 2006. The increase in interest supplements primarily reflects changes in Ford’s marketing programs that emphasized special-rate financing programs available only through us.

Beginning in 2008, to reduce ongoing obligations to us and to be consistent with general industry practice, Ford plans to pay interest supplements and residual value support to us at the time we purchase eligible contracts from dealers. Ford will continue to pay interest supplements and residual value support to us on contracts purchased prior to 2008 consistent with the present agreement, satisfying these obligations to us by the end of 2011. These changes are expected to result in accelerated payments of about $5 billion through 2009 that otherwise under the present method would have been paid after 2009. These changes will not have a significant impact on our income statement or our statement of shareholder’s interest/equity.

20

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 leases that are impaired as of 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.

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 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
	2007			2006			2007			2006
	(in millions)
Charge-offs
On-Balance Sheet
Retail installment and lease	$	170		$	132		$	388		$	307
Wholesale		13			6			25			25
Other		1			2			3			2
Total on-balance sheet	$	184		$	140		$	416		$	334
Reacquired Receivables (retail)*	$	0		$	0		$	0		$	2
Securitized Off-Balance Sheet
Retail installment and lease	$	16		$	21		$	48		$	63
Wholesale		—			—			—			—
Other		—			—			—			—
Total securitized off-balance sheet	$	16		$	21		$	48		$	63
Managed
Retail installment and lease	$	186		$	153		$	436		$	372
Wholesale		13			6			25			25
Other		1			2			3			2
Total managed	$	200		$	161		$	464		$	399
Loss-to-Receivables Ratios
On-Balance Sheet
Retail installment and lease		0.66	%		0.55	%		0.52	%		0.45	%
Wholesale		0.16			0.07			0.10			0.09
Total including other		0.53	%		0.41	%		0.40	%		0.33	%
Managed
Retail installment and lease		0.67	%		0.56	%		0.53	%		0.46	%
Wholesale		0.16			0.07			0.10			0.09
Total including other		0.54	%		0.43	%		0.42	%		0.36	%

* 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.

Charge-offs and loss-to-receivables ratios for our on-balance sheet and managed portfolios increased from a year ago. These increases, principally in the U.S. retail installment and lease portfolio, primarily reflect higher loss severity as described in the following section.

21

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

U.S. 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 operating 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, 2007. Trends and causal factors are consistent with the worldwide results described in the preceding section, with repossessions down 1,000 units in the third quarter of 2007 from a year ago, consistent with fewer accounts outstanding. Severity was higher by $1,000 per unit from a year ago, consistent with an increase in amount financed for vehicles repossessed in our portfolio, and a higher mix of 72-month contracts.

	Third Quarter						First Nine Months
	2007			2006			2007			2006
On-Balance Sheet
Charge-offs (in millions)	$	118		$	90		$	262		$	196
Loss-to-receivables ratios		0.79	%		0.63	%		0.60	%		0.49	%
Managed
Charge-offs (in millions)	$	129		$	104		$	292		$	242
Loss-to-receivables ratios		0.78	%		0.62	%		0.60	%		0.50	%
Other Metrics — Serviced
Repossessions (in thousands)		19			20			54			62
Repossession ratios (a)		1.95	%		1.91	%		1.82	%		1.93	%
Severity (Average loss per repossession)	$	7,500		$	6,500		$	7,000		$	6,200
New bankruptcy filings (in thousands)		7			6			20			15
Over-60 day delinquency ratio (b)		0.22	%		0.18	%		0.18	%		0.15	%

(a)	Repossessions as a percent of the average number of accounts outstanding during the periods.
(b)	Delinquencies are expressed as a percent of the accounts outstanding for non-bankrupt accounts.

Allowance for Credit Losses

Our allowance for credit losses and our allowance for credit losses as a percentage of end-of-period receivables (net finance receivables and net investment in operating leases) 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 of Part II of our 2006 10-K Report.

	September 30,			December 31,
	2007			2006
	(in millions)
Allowance for Credit Losses
Retail installment and lease	$	957		$	1,027
Wholesale		52			76
Other		2			7
Total allowance for credit losses	$	1,011		$	1,110
As a Percentage of End-of-Period Receivables
Retail installment and lease		0.92	%		1.05	%
Wholesale		0.15			0.22
Total including other		0.71	%		0.81	%

Our allowance for credit losses totaled $1,011 million at September 30, 2007, down $99 million from year-end 2006, and about equal to June 30, 2007. The allowance for credit losses is primarily a function of portfolio quality, historical loss performance, and receivable levels. Reductions in our allowance for credit losses since the end of 2006 are consistent with a higher quality retail installment and lease portfolio. Certain of our key credit loss metrics (repossession ratio, over-60 day delinquency ratio and new bankruptcy filings) are near historically low levels.

22

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. We have increased depreciation expense for vehicles subject to operating leases in our North America portfolio, reflecting higher lease volumes and an increase in the percentage of vehicles returned to us at lease termination. 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 of Part II of our 2006 10-K Report.

North America 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 about 97% of our total investment in operating leases at September 30, 2007:

	Third Quarter						First Nine Months
	2007			2006			2007			2006
	(in thousands)
Placements		127			100			376			353
Terminations		98			88			297			260
Returns		78			65			235			184
Memo:
Return rates		80	%		74	%		79	%		71	%

In the third quarter of 2007, placement volumes were up 27,000 units compared with the same period a year ago, consistent with industry trends. Termination and return volumes increased 10,000 units and 13,000 units, respectively, compared with a year ago, primarily reflecting growth in lease placements since 2004 and higher return rates, particularly with respect to trucks and sport utility vehicles, consistent with a general shift in consumer preferences away from these types of vehicles.

In the first nine months of 2007, placement volumes were up 23,000 units compared with the same period a year ago. Termination and return volumes increased 37,000 units and 51,000 units, respectively, consistent with the causal factors described above.

23

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

U.S. Ford, Lincoln and Mercury Brand Retail Operating Lease Experience

The following table shows return volumes for our Ford, Lincoln and Mercury brand U.S. operating lease portfolio. Also included are auction values at constant third quarter 2007 vehicle mix for lease terms comprising about 75% of our active Ford, Lincoln and Mercury brand U.S. operating lease portfolio:

	Third Quarter						First Nine Months
	2007			2006			2007			2006
	(in thousands)
Returns
24-Month term		18			18			65			37
36-Month term		16			11			46			47
39-Month/Other term		9			5			28			8
Total returns		43			34			139			92
Memo:
Return rates		83	%		79	%		83	%		72	%
Auction Values at Constant Third Quarter 2007 Vehicle Mix
24-Month term	$	16,685		$	15,740		$	16,820		$	16,810
36-Month term		14,195			13,620			14,540			14,135

In the third quarter of 2007, Ford, Lincoln and Mercury brand U.S. return volumes were up 9,000 units compared with the same period a year ago, primarily reflecting growth in lease placement volume since 2004 and higher return rates. Auction values at constant third quarter 2007 mix for 24-month and 36-month lease vehicles were up about $945 per unit and $575 per unit, respectively, from year ago levels, primarily reflecting increased vehicle content on returned vehicles, however, third quarter 2007 auction values were not as high as our expectations when we purchased the contracts.

In the first nine months of 2007, trends and causal factors compared with the same period a year ago were consistent with those described above.

24

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

Credit Ratings

Our short-term 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 (“SEC”):

• DBRS Limited (“DBRS”);

• Fitch, Inc. (“Fitch”);

• Moody’s Investors Service, Inc. (“Moody’s”); and

• Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”).

In September 2007, S&P placed our long-term debt on “CreditWatch” with positive implications. The following chart summarizes long-term senior unsecured credit ratings, short-term credit ratings and the outlook presently assigned to us by these NRSROs:

NRSRO RATINGS*
DBRS			Fitch			Moody’s			S&P
Long-	Short-		Long-	Short-		Long-	Short-		Long-	Short-
Term	Term	Trend	Term	Term	Outlook	Term	Term	Outlook	Term**	Term	Outlook
B	R-4	Negative	BB-	B	Negative	B1	NP	Negative	B	B-3	Watch Positive

*

The SEC recognized Rating and Investment Information, Inc. (“R&I”) and Japan Credit Rating Agency, Ltd. (“JCR”) as NRSROs in May 2007 and September 2007, respectively. Both agencies assign long-term issue ratings to our February 2005 ¥160 billion 1.71% issuance which matures in February 2008. R&I assigns a rating of BB- with a negative outlook and JCR assigns a rating of B+ with a negative outlook.

**

S&P presently assigns FCE Bank plc (“FCE”) a long-term rating of B+, a one notch positive differential versus Ford Credit.

25

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

Funding

Our funding strategy is to maintain a high level of liquidity by having a substantial cash balance and committed funding capacity, allowing us to meet our short-term funding obligations. As a result of lower credit ratings over the past few years, our unsecured funding costs have increased over time. While we continue to access the unsecured debt market, we have increased our use of securitization funding as it is presently more cost effective than unsecured funding and allows us access to a broad investor base. We plan to meet a significant portion of our 2007 funding requirements through securitizations and to continue to expand and diversify our asset-backed funding by asset class and region. In addition, we have various alternative business arrangements for select products and markets that reduce our funding requirements while allowing us to support Ford (e.g., our partnering in Brazil for retail financing and FCE’s partnering with various financial institutions in Europe for full service leasing and retail financing). We are continuing to pursue such alternative business arrangements.

Consistent with the overall market, we were impacted by volatility in the asset-backed commercial paper market during the third quarter of 2007. As a result, our FCAR program issued a majority of commercial paper with overnight maturities and at higher costs for a period of several weeks in late August 2007 and early September 2007. To temporarily reduce the FCAR commercial paper outstanding (by about $3 billion), we elected not to sell additional asset-backed securities to FCAR and called several pools of receivables backing asset-backed securities owned by FCAR. We also experienced higher costs for several of our other committed liquidity programs as well as our public and private issuances. During the third quarter of 2007, we experienced about an $800 million reduction in our committed liquidity programs as part of our annual renewal processes.

If there were reductions in the market capacity for the types of asset-backed commercial paper used in our asset-backed funding, there could be increased risk to our available funding sources, particularly in the U.S., Europe, and Canada, our largest markets for asset-backed funding. As a result, we may need to reduce the amount of receivables and operating leases we purchase or originate. A significant reduction in our managed receivables would reduce our ongoing profits, and could adversely affect our ability to support the sale of Ford vehicles.

26

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,			December 31,
	2007			2006
	(in billions)
Debt
Asset-backed commercial paper*	$	12.1		$	16.5
Other asset-backed short term debt*		5.2			1.2
Ford Interest Advantage		5.3			5.6
Unsecured commercial paper		0.5			0.4
Other short-term debt		1.1			2.1
Total short-term debt		24.2			25.8
Unsecured long-term debt (including notes payable within one year)		64.5			72.0
Asset-backed long-term debt (including notes payable within one year)*		44.4			41.9
Total debt		133.1			139.7
Securitized Off-Balance Sheet Funding
Securitized off-balance sheet portfolio		7.6			12.2
Retained interest		(0.8	)		(1.0	)
Total securitized off-balance sheet funding		6.8			11.2
Total debt plus securitized off-balance sheet funding	$	139.9		$	150.9
Ratios
Credit lines to total unsecured commercial paper		>100	%		>100	%
Securitized funding to managed receivables		46			48
Short-term debt and notes payable within one year to total debt		42			43
Short-term debt and notes payable within one year to total capitalization		39			40

* Obligations issued in securitizations that are payable out of collections on the underlying securitized assets and related enhancements.

At September 30, 2007, unsecured long-term debt (including notes payable within one year) was down about $8 billion from year-end 2006, primarily reflecting about $16 billion of debt maturities offset partially by about $7 billion of unsecured long-term debt issuance and about $1 billion increase in the debt balance due to changes in currency exchange rates. Asset-backed long-term debt (including notes payable within one year) was up about $3 billion from year-end 2006, reflecting asset-backed long-term debt issuance in excess of amortization of asset-backed debt. Securitized off-balance sheet funding was down about $4 billion from year-end 2006, primarily reflecting the amortization of previous securitizations.

27

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

Term Funding Plan

The following table shows our completed public and private term funding issuances in 2006 and through October 31, 2007 and our planned issuances for full year 2007:

	2007
	Full Year		Through		2006
	Forecast		October 31,		Actual
	(in billions)
Public Transactions
Unsecured	$	6 –   8	$	6	$	9
Securitizations (a)		6 –   7		6		14
Total public transactions	$	12 – 15	$	12	$	23
Private Transactions(b)	$	23 – 26	$	21	$	29

(a)	Reflects new issuance; excludes whole loan sales and other structured financings.
(b)	Includes private term debt, securitizations, other structured financings and whole loan sales; excludes sales to Ford Credit’s on-balance sheet asset-backed commercial paper programs.

Through October 31, 2007, we completed about $12 billion of public term funding transactions, including about $6 billion of unsecured long-term debt, about $5 billion of retail asset-backed securitizations in the U.S., and about $1 billion in a public retail asset-backed securitization transaction in Germany.

Through October 31, 2007, we completed about $21 billion of private term funding transactions (excluding our on-balance sheet asset-backed commercial paper programs and proceeds from revolving transactions) in several markets. These private transactions included lease, wholesale and retail asset-backed securitizations and unsecured term debt.

28

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

Liquidity

We define liquidity as cash, cash equivalents and marketable securities (excluding marketable securities related to insurance activities) and capacity (which includes capacity in our committed liquidity programs, FCAR asset-backed commercial paper program and credit facilities) less asset-backed capacity in excess of eligible receivables and cash required to support on-balance sheet securitizations. We maintain multiple sources of liquidity to meet our short-term funding obligations.

	September 30,			December 31,
	2007			2006
	(in billions)
Cash, cash equivalents and marketable securities (a)	$	12.0		$	21.8
Committed liquidity programs	$	35.1		$	35.1	(b)
Asset-backed commercial paper (FCAR)		17.3			18.6
Asset-backed commercial paper (Motown NotesSM)		0.0			6.0
Credit facilities		3.2			3.8
Capacity	$	55.6		$	63.5
Capacity and cash	$	67.6		$	85.3	(b)
Less: Capacity in excess of eligible receivables		(3.2	)		(15.2	)
Less: Cash to support on-balance sheet securitizations		(4.4	)		(3.7	)
Liquidity	$	60.0		$	66.4	(b)
Less: Utilization		(32.8	)		(30.7	)
Liquidity available for use	$	27.2		$	35.7	(b)

(a)	Excluding marketable securities related to insurance activities.
(b)	As of January 1, 2007.

At September 30, 2007, the capacity of our liquidity sources and cash totaled $67.6 billion, of which $60 billion could be utilized (based on the availability of eligible assets and the level of cash required to support on-balance sheet securitizations). As of September 30, 2007, $32.8 billion was utilized, leaving $27.2 billion (including $7.6 billion of cash, cash equivalents and marketable securities, excluding marketable securities related to insurance activities) available for use. These amounts exclude programs that are dependent on extendible asset-backed commercial paper, including our Motown Notes program and $1.4 billion of committed liquidity programs, as there is presently a lack of investor demand.

Cash, Cash Equivalents and Marketable Securities.At September 30, 2007, our cash, cash equivalents and marketable securities (excluding marketable securities related to insurance activities) totaled $12 billion, compared with $21.8 billion at year-end 2006. We ended 2006 with a high level of cash as a result of favorable funding opportunities late last year which pre-funded some of our 2007 first quarter maturities. In the normal course of our funding activities, we may generate more proceeds than are necessary for our immediate funding needs. These excess amounts are maintained primarily as highly liquid investments, which provide liquidity for our short-term funding needs and give us flexibility in the use of our other funding programs. Our cash, cash equivalents and marketable securities (excluding marketable securities related to insurance activities) 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 maturity of these investments is typically less than 90 days and is adjusted based on market conditions and liquidity needs. We monitor our cash levels and average maturity on a daily basis. Cash balances include amounts to be used only to support our on-balance sheet securitizations of $4.4 billion at September 30, 2007 and $3.7 billion at December 31, 2006.

Committed Liquidity Programs.We have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits (“conduits”) and other financial institutions whereby such parties are contractually committed, at our option, to purchase from us eligible retail or wholesale assets or to make advances under asset-backed securities backed by wholesale assets for proceeds of up to $29.1 billion at September 30, 2007 ($16.3 billion retail and $12.8 billion wholesale). These committed liquidity programs have varying maturity dates, with $20.9 billion having maturities within the next twelve months, and the balance having maturities between August 2009 and September 2011. Our ability to obtain funding under these programs is subject to having a sufficient amount of assets eligible for these programs. At September 30, 2007, $15.1 billion of these commitments were in use. These programs are extremely liquid funding sources as we are able to obtain funding from available capacity generally within two days. These programs 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 obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these programs to be terminated due to such events.

29

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

In addition, we have a multi-year committed liquidity program for the purchase of up to $6 billion of unrated asset-backed securities that at our option can be supported with various retail, wholesale, or lease assets. Our ability to obtain funding under this program is subject to having a sufficient amount of assets available to issue the securities. This program is also 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 obtain funding. At September 30, 2007, we had $3.8 billion of outstanding funding in this program.

30

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

Credit Facilities

Our credit facilities were as follows on the dates indicated:

	September 30,			December 31,
	2007			2006
	(in billions)
Credit Facilities
Ford Credit bank lines	$	0.5		$	1.1
FCE bank lines		2.7			2.7
Utilized amounts		(1.1	)		(1.2	)
Available credit facilities	$	2.1		$	2.6
Asset-Backed Commercial Paper Lines
FCAR asset-backed commercial paper lines	$	17.3		$	18.6
Motown NotesSM asset-backed commercial paper lines		0.3			0.3
Total asset-backed commercial paper lines	$	17.6		$	18.9

At September 30, 2007, we and our subsidiaries, including FCE, had $3.2 billion of contractually committed unsecured credit facilities with financial institutions, of which $2.1 billion were available for use. Of the lines available for use, 17% (or about $400 million) are committed through December 31, 2011, a majority are committed through June 30, 2009, and the remainder are committed for a shorter period of time. Of the $3.2 billion, about $500 million constitute Ford Credit bank lines (about $200 million global and about $300 million non-global) and $2.7 billion are FCE bank lines ($2.6 billion global and about $100 million non-global). The Ford Credit global credit facilities may be used, at our option, by any of our direct or indirect, majority owned subsidiaries. Similarly, the FCE global credit facilities may be used, at FCE’s option, by any of FCE’s 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 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 obtain funding.

In addition, at September 30, 2007, banks provided $17.6 billion of contractually committed liquidity facilities to support our two on-balance sheet asset-backed commercial paper programs; $17.3 billion supported our FCAR program and $300 million supported our Motown Notes^SM wholesale securitization program (“Motown Notes”). Of the contractually committed liquidity facilities, 46% (or about $8 billion) are committed through June 30, 2012, and the remainder are committed for a shorter period of time. Utilization of each of these facilities is subject to conditions specific to each program and our having a sufficient amount of eligible assets for securitization. The FCAR program must be supported by liquidity facilities equal to at least 100% of its outstanding balance. At September 30, 2007, $17 billion of FCAR’s bank liquidity facilities were available to support FCAR’s asset-backed commercial paper, subordinated debt or FCAR’s purchase of our asset-backed securities, and the remaining $300 million of FCAR’s bank liquidity facilities were available to support FCAR’s purchase of our asset-backed securities. The Motown Notes program must be supported by liquidity facilities equal to at least 5% of its outstanding balance. The Motown Notes program bank liquidity facilities are available to support the issuance of Motown Notes, but these facilities cannot be accessed directly to fund the purchase of our wholesale receivables. We are not presently issuing Motown Notes and do not intend to use this program in the foreseeable future as there is presently a lack of investor demand for extendible commercial paper. At September 30, 2007, the outstanding balances were $12.3 billion for the FCAR program and zero for the Motown Notes program.

Liquidity Risks

Refer to the “Liquidity” section of Item 7 of Part II of our 2006 10-K Report for a list of factors that could affect our liquidity.

31

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

Off-Balance Sheet Arrangements

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

	Third Quarter				First Nine Months
	2007		2006		2007		2006
	(in billions)
North America segment
Public retail	$	—	$	—	$	—	$	—
Retail conduit		—		0.5		0.7		1.5
Motown Notes program		—		—		—		—
Public wholesale		—		—		—		—
Canada and other		—		—		—		—
Total North America segment		—		0.5		0.7		1.5
International segment
Europe
Public retail		—		—		—		0.1
Retail conduit		—		—		—		0.1
Total Europe		—		—		—		0.2
Asia-Pacific		—		0.3		—		0.3
Latin America		—		0.3		—		1.0
Total International segment		—		0.6		—		1.5
Net proceeds		—		1.1		0.7		3.0
Whole-loan sales		—		—		—		1.0
Total net proceeds	$	—	$	1.1	$	0.7	$	4.0

In the first nine months of 2007, total net proceeds from off-balance sheet securitizations were about $700 million, down $3.3 billion compared with a year ago. The decrease in net proceeds reflected lower utilization of off-balance sheet securitizations and whole-loan sales transactions.

32

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

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

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

	Third Quarter						First Nine Months
	2007			2006			2007			2006
	(in millions)
Servicing fees	$	28		$	45		$	99		$	157
Interest income on retained interests		9			8			27			24
Net gain on sales of receivables		—			30			5			84
Income on residual interest and other		60			86			177			277
Investment and other income related to sales of receivables		97			169			308			542
Less: Whole-loan income		(10	)		(15	)		(32	)		(35	)
Income related to off-balance sheet securitizations	$	87		$	154		$	276		$	507
Memo:
Finance receivables sold (in billions)	$	—		$	1.1		$	0.8		$	4.2
Servicing portfolio as of period-end (in billions)		8.7			15.4			8.7			15.4
Pre-tax gain per dollar of retail receivables sold		—			2.7	%		0.6	%		2.0	%

In the third quarter and first nine months of 2007, income related to off-balance sheet securitizations declined $67 million and $231 million, respectively, compared with a year ago. The declines primarily reflected amortization of the off-balance sheet securitization portfolio.

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 on-balance sheet asset-backed financings for the periods indicated:

	Third Quarter						First Nine Months
	2007			2006			2007			2006
	(in millions)
Retail revenue	$	160		$	258		$	570		$	884
Borrowing cost		(91	)		(134	)		(322	)		(474	)
Net financing margin		69			124			248			410
Net credit losses		(16	)		(21	)		(48	)		(63	)
Income before income taxes	$	53		$	103		$	200		$	347
Memo:
Income related to off-balance sheet securitizations	$	87		$	154		$	276		$	507
Recalendarization impact of off-balance sheet securitizations		34			51			76			160

In the third quarter and first nine months of 2007, the impact on earnings of reporting the sold receivables as off-balance sheet securitizations was $34 million and $76 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. All other things being equal, in a steady state of securitization activity, the difference between reporting securitizations on- or off-balance sheet in a particular year approaches zero.

33

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 refer to our shareholder’s interest and our historical stockholder’s equity as equity. 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
				Off-balance		Off-balance		Equivalents &		Adjustments for
				Sheet		Sheet		Marketable		Hedge Accounting
Managed Leverage	=	Total Debt	+	Receivables	-	Receivables	-	Securities*	-	on Total Debt
				Equity	+	Minority Interest	-	Adjustments for Hedge Accounting on Equity

* Excludes marketable securities related to insurance activities.

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

	September 30,		December 31,
	2007		2006
Total debt	$	133.1	$	139.7
Total equity		13.0		11.8
Financial statement leverage (to 1)		10.2		11.9

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

	September 30,			December 31,
	2007			2006
Total debt	$	133.1		$	139.7
Securitized off-balance sheet receivables outstanding		7.6			12.2
Retained interest in securitized off-balance sheet receivables		(0.8	)		(1.0	)
Adjustments for cash, cash equivalents and marketable securities*		(12.0	)		(21.8	)
Adjustments for hedge accounting		0.0			(0.1	)
Total adjusted debt	$	127.9		$	129.0
Total equity (including minority interest)	$	13.0		$	11.8
Adjustments for hedge accounting		(0.3	)		(0.5	)
Total adjusted equity	$	12.7		$	11.3
Managed leverage (to 1)		10.1			11.4

* Excludes marketable securities related to insurance activities.

We plan our managed leverage by considering prevailing market conditions and the risk characteristics of our business. At September 30, 2007, our managed leverage was 10.1 to 1, compared with 11.4 to 1 at December 31, 2006.

Accounting Standards Issued But Not Yet Adopted

We have not yet adopted SFAS No. 157, Fair Value Measurements. Refer to Item 7 of Part II of our 2006 10-K Report for further discussion of this standard.

We have not yet adopted SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). Refer to Item 2 of Part I of our quarterly report on Form 10-Q for the quarter ended March 31, 2007 for further discussion of this standard.

34

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

Outlook

We expect pre-tax earnings to be about $1.3 billion to $1.4 billion this year, excluding the impact of gains and losses related to market valuation adjustments from derivatives, consistent with our previous estimate.

The lower earnings expected in 2007 compared with 2006 primarily reflect higher borrowing costs, lower credit loss reserve reductions, higher depreciation expense for leased vehicles and the costs associated with our North American business transformation initiative. We expect reductions in other operating costs to be a partial offset.

We plan to target managed leverage between 11 to 1 and 12 to 1 in 2008, and as such, we plan to resume paying regular distributions or dividends beginning in 2008. Dependent upon maintaining managed leverage at targeted levels, we forecast these distributions to total about $5 billion through 2009.

At year-end 2007, we anticipate managed receivables to be in the range of $145 to $150 billion. Compared with our prior projection of about $145 billion, the increase primarily reflects changes in currency exchange rates. We expect the funding structure required for this level of managed receivables to be the following (in billions, except for percentages).

	December 31,
	2007
Funding Structure
Ford Interest Advantage	$	5   –     6
Asset-backed commercial paper		13   –   15
Term asset-backed securities		56   –   58
Term debt and other		68   –   72
Equity		13
Cash, cash equivalents and marketable securities*		(12)  –  (14	)
Total funding structure	$	145   –  150
Memo:
Securitized funding as a percentage of managed receivables		48   –    50	%

* Excludes marketable securities related to insurance activities.

Cautionary Statement Regarding Forward Looking Statements

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

Automotive Related:

• Continued decline in Ford’s market share;

• Continued or increased price competition for Ford vehicles resulting from industry overcapacity, currency fluctuations or other factors;

• An increase in or acceleration of market shift away from sales of trucks, sport utility vehicles, or other more profitable vehicles, particularly in the United States;

• A significant decline in industry sales and our financing of those sales, particularly in the United States or Europe, resulting from slowing economic growth, geo-political events or other factors;

• Lower-than-anticipated market acceptance of new or existing Ford products;

• Continued or increased high prices for or reduced availability of fuel;

• Adverse effects from the bankruptcy or insolvency of, change in ownership or control of, or alliances entered into by a major competitor;

• Economic distress of suppliers that has in the past or may in the future require Ford to provide financial support or take other measures to ensure supplies of components or materials;

• Work stoppages at Ford or supplier facilities or other interruptions of supplies;

• Single-source supply of components or materials;

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

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

• Increased safety, emissions (e.g., CO2), fuel economy or other (e.g., pension funding) regulation resulting in higher costs, cash expenditures and/or sales restrictions;

• Unusual or significant litigation or governmental investigations arising out of alleged defects in Ford products or otherwise;

• A change in Ford’s requirements for parts or materials where it has entered into long-term supply arrangements that commit it to purchase minimum or fixed quantities of certain parts or materials, or to pay a minimum amount to the seller (“take-or-pay contracts”);

• Adverse effects on our results from a decrease in or cessation of government incentives;

• Adverse effects on Ford’s operations resulting from geo-political or other events;

• Substantial negative operating-related cash flows for the near- to medium-term affecting Ford’s ability to meet its obligations, invest in its business or refinance its debt;

• Substantial levels of indebtedness adversely affecting Ford’s financial condition or preventing Ford from fulfilling its debt obligations (which may grow because Ford is able to incur substantially more debt, including additional secured debt);

Ford Credit Related:

• Inability to access debt or securitization markets around the world at competitive rates or in sufficient amounts due to additional credit rating downgrades, market volatility, market disruption or otherwise;

• Higher-than-expected credit losses;

• Increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles;

• Collection and servicing problems related to our finance receivables and net investment in operating leases;

• Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles;

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

• Changes in Ford’s operations or changes in Ford’s marketing programs could result in a decline in our financing volumes;

General:

• Labor or other constraints on Ford’s or our ability to restructure its or our business;

• Substantial pension and postretirement healthcare and life insurance liabilities impairing Ford’s or our liquidity or financial condition;

• Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates, investment returns, and health care cost trends);

• Currency or commodity price fluctuations; and

• Changes in interest rates.

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. For additional discussion of these risk factors, see Item 1A of Part I of our 2006 10-K Report and Item 1A of Part I of Ford’s 2006 10-K Report.

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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In our 2006 10-K Report, we discuss in greater detail our market risk, counter-party risk, credit risk, residual risk, liquidity 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, 2007, all else constant, such an increase in interest rates would reduce our pre-tax cash flow by $54 million over the next twelve months, compared with $86 million at December 31, 2006. 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

Michael E. Bannister, our Chairman of the Board and Chief Executive Officer (‘‘CEO’’), and Kenneth R. Kent, our Vice Chairman, Chief Financial Officer (‘‘CFO’’) and Treasurer, have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15 (e) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), as of September 30, 2007 and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting during the third quarter of 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

We entered into an agreement in July 2007 to sell a majority of our interest in AB Volvofinans. The transaction was completed in September 2007.

In October 2007, FCE agreed with a third party to establish a joint venture finance company. The transaction is subject to certain conditions, including regulatory approval. If the transaction is completed, FCE will transfer the majority of its business and assets from four European locations, constituting approximately 5% of FCE’s current balance sheet, into the joint venture. The joint venture will support the sale of Ford vehicles in these markets.

Additional information about Ford can be found in Ford’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007, 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 41.

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.

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SIGNATURES

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

FORD MOTOR CREDIT COMPANY LLC
By:	/s/ Kenneth R. Kent(Kenneth R. Kent)
	Vice Chairman, Chief Financial Officer and Treasurer
Date: November 8, 2007

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Ford Motor Credit Company LLC
(formerly Ford Motor Credit Company):

We have reviewed the accompanying consolidated balance sheet of Ford Motor Credit Company LLC and its subsidiaries (the “Company”) as of September 30, 2007 and the related consolidated statement of income for each of the three-month and nine-month periods ended September 30, 2007 and 2006, the consolidated statement of shareholder’s interest/equity as of September 30, 2007 and 2006, and the consolidated statement of cash flows for the nine-month periods ended September 30, 2007 and 2006. 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 (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2006, and the related consolidated statements of income, of stockholder’s equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 27, 2007 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2006 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 8, 2007

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FORD MOTOR CREDIT COMPANY LLC

EXHIBIT INDEX

Designation	Description	Method of Filing
Exhibit 12	Ford Motor Credit Company LLC and Subsidiaries Calculation of Ratio of Earnings to Fixed Charges	Filed with this Report
Exhibit 15	Letter of PricewaterhouseCoopers LLP, dated November 8, 2007, 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, 2007	Incorporated herein by reference to Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007. File No. 1-3950.

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