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Ford Ups Credit Loss Reserves Due to Repossesions

December 5, 2001

Ford Motor Co. on Dec. 5 said more bad loans and vehicle repossessions in a faltering U.S. economy have forced it to raise credit loss reserves for its finance company by a "few hundred million" dollars.

"In this weaker economic environment, we believe it is prudent to increase our credit loss reserves," Ford Chief Financial Officer Martin Inglis told reporters and analysts in a conference call.

According to Inglis, unemployment and bankruptcy filings -- both skyrocketing since the Sept. 11 terrorist attacks in New York and Washington -- were factors contributing to higher vehicle repossessions and credit losses.

Ford blamed the higher credit losses for pushing its expected fourth-quarter loss to 50 cents per share before charges. Wall Street analysts had expected Ford to lose 14 cents per share, before charges, according to research firm Thomson Financial/First Call.

Ford's credit loss reserves rose by a "few hundred million" dollars after taxes to cover expected losses in upcoming quarters, Inglis told reporters, without specifying the exact figure.

According to Inglis, vehicle repossessions rose 6 percent year-over-year in the third quarter, and economic indicators worsened in the fourth quarter. Also, the amount Ford realised from the sale of the repossessed vehicles decreased due to weaker prices for used cars and trucks.

"It will be a challenge for our credit company going into next year," Inglis said.

As a result, Ford Motor Credit will not make a dividend payment to the parent company in the fourth quarter, according to Inglis. The credit unit had previously been expected to pay between $100 million to $150 million to Ford Motor Co., Inglis said.

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