Ford Credit Earnings Top Parent Ford Earnings in Autos

(MoneyWatch)  A more prosperous Ford Credit finance arm was a key reason parent company Ford earnings posted such a big turnaround for 2009.

Overall, Ford (F) had a net profit of about $2.7 billion in 2009, an improvement of about $17.5 billion over a big loss in 2008, despite lower sales and revenues in 2009.

However, the 2009 Ford earnings result included gains of about $4.7 billion in special items related to one-time debt reduction. In terms of pre-tax earnings, the Ford automotive sector actually lost $1.4 billion for the year, while Ford Credit had pre-tax earnings of $1.9 billion.

In terms of net income, Ford Credit earned $1.3 billion in 2009, versus a net loss of $1.5 billion in 2008.

Even though it has cost them volume, Ford Credit has stuck with a more selective approach toward consumers, steadily increasing the average credit score for its loan and lease customers. That means Ford Credit is turning down most customers with less-than-sterling credit.

Ford Credit said its average FICO score for loan and lease customers in 2009 was 726. FICO stands for Fair Isaac Corp., a credit rating agency. That 726 score corresponds to a high-quality risk. In five of the last seven years, Ford has increased its average credit score, starting from a low of 674 in 2002. Charge-offs and Ford Credit's allowance for credit losses are down from those days, too.

Ford Credit reported today the finance company expects to be profitable again in 2010, but probably below this year, in part due to lower volumes of new business.