Ford Motor Co. captive finance arm Ford Credit's first quarter 2002 earnings of $256 million were down $137 million (35 percent) from earnings of $393 million in the same period a year ago.

Excluding favorable adjustments related to SFAS No. 133 (Accounting for Derivative Instruments and Hedging Activities), Ford Credit earned $242 million and results were down $164 million on Q1, 2001. First quarter 2002 earnings were up $236 million compared with the fourth quarter of 2001 of $6 million excluding unusual items.

Compared with the first quarter of 2001, earnings were down because of the unfavorable impact of securitisations and higher actual credit losses, offset partially by improved financing margins and higher levels of managed receivables, according to the company.

Ford Credit said increased securitizations over the past 12 months resulted in lower owned receivables and related revenue, offset partially by higher income on retained interests, excess spread and servicing fees.

Higher actual credit losses reflected weaker economic conditions compared with a year ago. Financing margins improved because of lower borrowing costs related to the lower interest rate environment, according to Ford Credit.

Managed receivables were $206 billion as of March 31, 2002, compared with $194 billion a year earlier, reflecting strong year-end volume. Ford Credit's total owned receivables as of March 31, 2002, were $140 billion, compared with $162 billion a year earlier.

After-tax return on average equity (excluding SFAS No. 133) was 7.5 percent in the first quarter of 2002, compared with 13.3 percent in the same period a year earlier.

"The economy continues to pose challenges, but is showing signs of recovery, evidenced by our improved financial performance over the last quarter," said president and chief operating officer Greg Smith.

"We remain focused on the fundamentals of our business and recognize that further improvement is required," Smith said.