In what has proved to be a very poor quarter for the major US car maker, Ford's credit arm has added to the gloom by revealing that its income and revenues more than halved in the third quarter and that five years of financial statements will have to be restated.
Ford Motor Credit reported net income of $262 million in the third quarter of 2006, down $315 million from earnings of $577 million a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $428 million in Q3, compared with $901 million in the previous year.
The auto maker said that the decrease in earnings primarily reflected lower financing margins, higher depreciation expense and the impact of lower average receivable levels.
Meanwhile, Ford Motor Credit has also announced that it plans to restate previous financial results from 2001 through to the second quarter of 2006 to correct accounting errors. The company discovered that, since 2001, certain interest rate swaps Ford Motor Credit had entered into to hedge the interest rate risk inherent in certain long-term fixed rate debt were accounted for incorrectly.
The restatements are expected to affect the preliminary financial results Ford Motor Credit announced for its 2006 third quarter. However, the company expects to finalize restatement amounts for the current and all previous periods by the time of the filing of its quarterly report for the quarter ended September 30, 2006.