Ford sees credit losses inching up
Ford Credit CFO Mike Seneski expects the lender's credit losses for bad loans to rise slightly this year while losses stay well below the company's 10-year average.
His forecast, made last week during a presentation to investors and analysts, mirrors projections from industry analysts on the overall trend in auto loans: Delinquencies and losses are ticking up slightly, but levels are still low. The trend should keep credit fairly easy for consumers to get.
Seneski said Ford Motor Credit Co.'s credit losses, or charge-offs for bad loans, accounted only for 0.16 percent of outstanding loans and leases worldwide in 2012, down from 0.24 percent in 2011. Over the past 10 years, the average was 0.67 percent.
"Obviously, we don't expect to go back to that level, to that historical average, but we do expect to see a pick up" in 2013, Seneski said.
He said Ford Credit's allowance for credit losses -- reserves set aside against future losses -- will also increase in 2013. That's partly because of the slight uptick in losses but also because Ford Credit's volume is growing, he said.
Ford Credit expects its outstanding loans and leases to grow to between $110 billion and $120 billion by the middle of this decade, up from $91 billion at the end of 2012.
From the 2012 level to the middle of that range would be an increase of about 26 percent. For 2013, Ford Credit expects outstanding loans and leases of $95 billion to $105 billion.
Seneski said Ford Credit also expects a higher volume of U.S. lease returns to come back to the captive in 2013, reflecting an increase in new leases in 2010 and 2011. He said lease returns should be around 100,000 units this year, up from 62,000 in 2012. Off-lease units should keep growing in 2014, he said.
"It's not just us," he said. "It's the entire industry."
You can reach Jim Henry at email@example.com.