Thanks to a former chairman and CEO of competitor Wells Fargo & Co., Ford Credit has climbed out of the hole and, with the support of Ford and Lincoln Mercury dealers, is back on Recovery Road in 2002.

The man given credit for reversing a slide into red ink by Ford Credit last year is Carl E. Reichardt. The 70-year-old Reichardt became a Ford Motor Co. director in 1986, when he was running Wells Fargo. A veteran of the financing industry, Reichardt was conveniently on hand as a company director when Ford Credit was rolling up a fourth-quarter loss of $297 million and it was obvious the expansive policies of CEO Donald A. Winkler were not working.

It was Reichardt who agreed to take on the Ford Credit salvage job and become a Ford vice-chairman, though being at an age when the only thing most long-time executives are doing fulltime is golfing and traveling. He had persuaded Ford Motor Chairman and CEO William Clay Ford, Jr. to fire Winkler and promote Ford Credit veteran Gregory C. Smith to succeed him.

“His presence here cannot be overestimated,” Bill Ford told a Wall Street analysts’ meeting last May, in Dearborn, Mich. “Ford Credit has turned around faster than we anticipated.”

Implementing a number of basic changes in Ford Credit operational policies, Reichardt and Smith bounced Ford Credit from the unaccustomed loss in the December quarter to a $256 million profit in the first quarter of 2002.

To maintain the profit momentum, Reichardt oversaw a drastic reduction starting this year in high-risk loans and nonprime lending, causing the closedown of the Fairlane Credit subsidiary based in Colorado Springs, Colo. Financing of non-Ford vehicles, even those sold by Ford and Lincoln-Mercury dealers, was sharply curtailed.

And, not the least, in a major effort to improve brand loyalty, Ford and LM dealers were pressed to give more of their wholesale floorplan and retail lease and retail business to their factory’s finance subsidiary.

Ford Credit’s 10-K report to the SEC for 2001 underscores the dealer “loyalty” initiative. Ford Credit’s share of retail loans and leases at Ford and LM dealers jumped to 69 percent in the fourth quarter of 2001 from 48 percent in the same 2000 period. Wholesale financing increased from 80 to 84 percent.

The fourth quarter of last year, coming in the wake of the terrorist attacks of Sept. 11, saw “loyalty” financing boosted by zero percent loans. Ford Credit says there has been no reversal of the trend in early 2002, with Smith telling the analysts’ meeting in Ford Credit’s home base of Dearborn, Mich., that the company has benefited this year by declining credit losses, repossession losses per repo.

In a candid admission of how vital a position Ford Credit has in the parent company’s financial picture, Bill Ford said, “I sleep better at night, knowing this is one land mine that’s not going to blow up on us.”

Having lost more than $5 billion in 2001, although Ford Credit managed to turn in a net profit of $839 million despite its 45.4 percent shortfall from 2000, Ford Motor Co. was more aware than ever on how dependent it is on the Red Carpet loan and lease crowd next door to the Glass House world headquarters building on Michigan Avenue.

From 1997 to 2001, Ford Credit earnings presented Ford Motor Co. with about one-third of its net income. And in this year’s March quarter, Ford Credit kept its receivables steady at $206 billion, more than enough to sustain it as “the world’s largest automotive financing company based on the dollar value of the portfolio of finance receivables we own and manage.”

As a measure of the big numbers generated by Ford Credit, the lender reports that as of Dec. 31, 2001, it had loaned dealers in the U.S. and Canada about $4.3 billion in loans for facilities improvements, working capital and for purchases of dealership real estate. About $15.6 billion worldwide was earmarked for wholesale vehicle financing.

So interdependent are Ford Motor and Ford Credit that even though the former lost an average of more than $400 million a month last year, it paid Ford Credit a capital contribution of $700 million in January to help the recovery effort. Normally, Ford Credit pays the parent company a dividend that has averaged about $600 million a year – until the 2001 fall-off. No dividends were possible in 2001 as Ford Credit’s credit losses doubled from 2000 to a whopping $2.1 billion as the residual-value debacle clipped its wings – as did many of Ford Credit’s competitors.

But Reichardt and Smith, now joined by highly respected company alumnus Allan D. Gilmour, 68, as a vice-chairman, believe that Ford Credit “is in good shape” going forward. Gilmour, who had retired in 1995 only to be recalled by Bill Ford because of his long-standing finance and product skills over a 34-year Ford career, joined the company as a finance staffer in 1960, when Ford Credit was organized by the legendary Ford Motor finance chief, J. Edward Lundy.

As Lundy’s protégé, Gilmour helped Ford Credit grow into a financial giant. He served on Ford Credit’s board as Ford Motor CFO and his return to active duty, alongside Reichardt and a Ford family member as chairman and CEO, gives Ford Credit a power-packed team to ensure a full recovery from its 2001 downward spiral.