Organization, Consolidation and Presentation of Financial Statements

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Presentation

NOTE 1. PRESENTATION

Principles of Consolidation

The accompanying consolidated financial statements include Ford Motor Credit Company LLC, its controlled domestic and foreign subsidiaries and joint ventures, and consolidated VIEs in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit,” “we,” “our,” or “us”). Affiliates that we do not consolidate, but for which we have significant influence over operating and financial policies, are accounted for using the equity method. We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”). We prepare our financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). We reclassify certain prior period amounts in our consolidated financial statements to conform to current year presentation.

Global Pandemic

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures.  As a result, extraordinary actions were taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. These actions included travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Consistent with the actions taken by governmental authorities, by late March 2020, nearly all of our employees, other than in China, began working remotely in order to reduce the spread of COVID-19. Our remote work arrangements have been designed to allow for continued operation of business functions, including originating and servicing customer contracts, financial reporting, and internal control.

Our results include adjustments due to the impact of COVID-19, the most significant of which was a charge to the provision for credit losses. The majority of this adjustment was recorded in the first quarter of 2020. See Note 4 for additional information.

Separation and Restructuring Actions

We executed separation and restructuring actions associated with our plans to transform our business. The impact of these actions was a loss of $56 million and $55 million, primarily separation costs, for the years ended December 31, 2019 and 2020, respectively.

Related to these restructuring actions, we determined that it was not probable that we would hold certain assets and liabilities for more than the following twelve months, and these assets and liabilities were reported as held-for-sale. The total value of our Assets held-for-sale presented at fair value at December 31, 2019 and 2020 were $1,698 million and $36 million respectively, and Liabilities held-for-sale presented at fair value at December 31, 2019 were $45 million. There were no Liabilities held-for-sale at December 31, 2020.

In the fourth quarter of 2019, we committed to a plan to sell our operations in Forso Nordic AB (“Forso”), a wholly owned subsidiary, which provided retail and dealer financing in Denmark, Finland, Norway, and Sweden. Our Income before income taxes at December 31, 2019 included a loss of $20 million due to a fair value impairment as a result of the pending sale. In the first quarter of 2020, we completed the sale of Forso recognizing a pre-tax loss of $4 million in Other income, net and cash proceeds of $1,340 million. Forso related Assets held-for-sale and Liabilities held-for-sale presented at fair value at December 31, 2019 were $1,416 million and $45 million, respectively (excluding intercompany assets of $2 million and intercompany liabilities of $1,274 million (primarily debt) which are eliminated in the consolidated balance sheets). The nonrecurring fair value measurement was categorized within Level 3 of the fair value hierarchy. We determined fair value using a market approach, estimated based on our expected proceeds to be received which we concluded was most representative of the value of the assets.

NOTE 1. PRESENTATION (Continued)

Nature of Operations

We offer a wide variety of automotive financing products to and through automotive dealers throughout the world. Our portfolio consists of finance receivables and net investment in operating leases. We also service the finance receivables and net investment in operating leases we originate and purchase, make loans to Ford affiliates, and provide insurance services related to our financing programs. See Notes 4, 5, and 11 for additional information. We conduct our financing operations directly and indirectly through our subsidiaries and affiliates. We offer substantially similar products and services throughout many different regions, subject to local legal restrictions and market conditions. See Note 14 for key operating data on our business segments and for geographic information on our regions.

The predominant share of our business consists of financing Ford and Lincoln vehicles and supporting Ford and Lincoln dealers. Any extended reduction or suspension of Ford’s production or sale of vehicles due to a decline in consumer demand, work stoppage, governmental action, negative publicity or other event, or significant changes to marketing programs sponsored by Ford, would have an adverse effect on our business.

Certain subsidiaries are subject to regulatory capital requirements that may limit the ability of those subsidiaries to pay dividends.