Featherweight Ford gains access to OzCar funds

Ford Credit in Australia may finally get to lighten the funding load on its US parent and source replacement funding from Australian banks, with the activation, after long delays, of the OzCar Trust.

The Treasurer, Wayne Swan, on Friday in a media release said the government instructed Credit Suisse to take the final steps necessary to activate the trust and make funding available from early September.

Swan first announced government financial assistance for motor dealer financing in early December 2008, about six weeks after GE Money and GMAC advised their dealers that they would withdraw floor plan financing by the end of that year.

At this stage Ford Credit may be the only provider of floor plan finance making any significant use of the trust. Some GMAC-funded dealers that have been unable to find a new funder may also need to turn to the banks, backed by the trust, for funding.

While GE Money, or some of its dealers, are also notionally a beneficiary of these funding arrangements between banks and the government, the financier has said in the past that all its network of car dealers found alternative sources of funding.

FCA Holdings (as Ford Credit in Australia is now known) executed a charge over present and future assets a week ago in favour of Perpetual Corporate Trust, the trustee for the OzCar ABS Trust 2009-1. FCA and Perpetual designated this charge as the "Featherweight" charge, perhaps reflecting a term used in early planning.

Back in May when the government belatedly introduced legislation to parliament to enable a funding guarantee announced seven months earlier, Treasury estimated the overall contingent liability for the Australian government from the guarantee over the subordinated loans from banks to Ford Credit (and also GMAC) at around $550 million.

The subsequent Australian National Audit Office inquiry into the "Utegate" affair, including OzCar, more recently suggested that Ford Credit alone would benefit to the tune of $550 million in government-backed bank funding.

The actual funding benefit may be larger than this.

At December 2008 FCA Holdings had $2.1 billion in receivables of which $1.7 billion were funded by its US parent.

The law authorising government support for the OzCar Trust imposes no financial caps.


The recovery in vehicles sales over 2009, however, and which is a function of tax breaks for business buyers and cash handouts to most households, will have improved the trading position of most Ford (and other) car dealers.