UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



R	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended ~~September 30, 2016~~March 31, 2017



£	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ____________________ to ____________________
	Commission file number 1-6368

Ford Motor Credit Company LLC

(Exact name of registrant as specified in its charter)



Delaware	38-1612444
(State of organization)	(I.R.S. employer identification no.)
One American Road, Dearborn, Michigan	48126
(Address of principal executive offices)	(Zip code)

(313) 322-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

Exhibit Index begins on page 5052

FORD MOTOR CREDIT COMPANY LLC

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended ~~September 30, 2016~~March 31, 2017




	Table of Contents	Page

	Part I. Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statement	1
	Consolidated Statement of Comprehensive Income	1
	Consolidated Balance Sheet	2
	Consolidated Statement of Shareholder’s Interest	3
	Consolidated Statement of Cash Flows	4
	Notes to the Financial Statements	5
	Report of Independent Registered Public Accounting Firm	24
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Results of Operations	25
	Financing Shares and Contract Placement Volume	2930
	Financial Condition	3133
	Credit Risk	3234
	Residual Risk	3638
	Credit Ratings	3840
	Funding and Liquidity	3941
	Leverage	4345
	Outlook	4446
	Risk Factors	4547
	Accounting Standards Issued But Not Yet Adopted	4648
	Other Financial Information	4648
Item 3	Quantitative and Qualitative Disclosures About Market Risk	4648
Item 4	Controls and Procedures	4749
	Part II. Other Information
Item 1	Legal Proceedings	4850
Item 5	Other Information	4850
Item 6	Exhibits	4850
	Signature	4951
	Exhibit Index	5052

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(in millions)


	For the periods ended September 30,												For the periods ended March 31,
	2016			2015			2016			2015			2016			2017
	Third Quarter						First Nine Months						First Quarter
	(unaudited)												(unaudited)
Financing revenue
Operating leases	$	1,409		$	1,256		$	4,115		$	3,560		$	1,318		$	1,366
Retail financing	780			717			2,273			2,087			736			802
Dealer financing	450			383			1,333			1,131			440			451
Other	10			12			29			44			12			17
Total financing revenue	2,649			2,368			7,750			6,822			2,506			2,636
Depreciation on vehicles subject to operating leases	(1,085		)	(956		)	(3,174		)	(2,630		)	(1,014		)	(1,064		)
Interest expense	(697		)	(582		)	(2,030		)	(1,819		)	(646		)	(729		)
Net financing margin	867			830			2,546			2,373			846			843
Other revenue
Insurance premiums earned	38			32			118			97			39			40
Other income, net (Note 12)	109			78			224			179
Fee based revenue and other													—			55
Total financing margin and other revenue	1,014			940			2,888			2,649			885			938
Expenses
Operating expenses	287			279			891			820			294			304
Provision for credit losses (Note 5)	138			100			403			239
Provision for credit losses (Note 6)													128			152
Insurance expenses	22			20			113			60			12			31
Total expenses	447			399			1,407			1,119			434			487

Other income, net (Note 13)													63			30

Income before income taxes	567			541			1,481			1,530			514			481
Provision for income taxes	181			176			441			519			156			148
Net income	$	386		$	365		$	1,040		$	1,011		$	358		$	333

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)


	For the periods ended September 30,												For the periods ended March 31,
	2016			2015			2016			2015			2016		2017
	Third Quarter						First Nine Months						First Quarter
	(unaudited)												(unaudited)
Net income	$	386		$	365		$	1,040		$	1,011		$	358	$	333
Other comprehensive income/(loss), net of tax (Note 11)
Other comprehensive income/(loss), net of tax (Note 12)
Foreign currency translation	(72		)	(275		)	(41		)	(561		)	172		90
Total other comprehensive income/(loss), net of tax	(72		)	(275		)	(41		)	(561		)	172		90
Comprehensive income/(loss)	314			90			999			450			530		423
Less: Comprehensive income/(loss) attributable to noncontrolling interests	—			—			—			1			—		—
Comprehensive income/(loss) attributable to Ford Motor Credit Company	$	314		$	90		$	999		$	449		$	530	$	423

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)


	September 30, 2016			December 31, 2015			December 31, 2016			March 31, 2017
	(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents (Note 2)	$	5,675		$	8,886
Marketable securities (Note 2)	4,180			2,723
Finance receivables, net (Note 3)	100,891			96,823
Net investment in operating leases (Note 4)	26,961			25,079
Cash and cash equivalents (Note 3)							$	8,077		$	8,268
Marketable securities (Note 3)							3,280			3,687
Finance receivables, net (Note 4)							102,981			106,575
Net investment in operating leases (Note 5)							27,209			26,428
Notes and accounts receivable from affiliated companies	913			727			811			983
Derivative financial instruments (Note 8)	1,857			924
Other assets (Note 9)	2,515			2,286
Derivative financial instruments (Note 9)							909			806
Other assets (Note 10)							2,822			2,785
Total assets	$	142,992		$	137,448		$	146,089		$	149,532

LIABILITIES
Accounts payable
Customer deposits, dealer reserves, and other	$	1,200		$	1,104		$	1,065		$	1,119
Affiliated companies	587			313			336			535
Total accounts payable	1,787			1,417			1,401			1,654
Debt (Note 10)	123,537			119,601
Debt (Note 11)							126,492			129,210
Deferred income taxes	3,146			2,808			3,230			3,308
Derivative financial instruments (Note 8)	123			243
Other liabilities and deferred income (Note 9)	1,687			1,665
Derivative financial instruments (Note 9)							166			255
Other liabilities and deferred income (Note 10)							1,997			1,898
Total liabilities	130,280			125,734			133,286			136,325

SHAREHOLDER’S INTEREST
Shareholder’s interest	5,227			5,227			5,227			5,227
Accumulated other comprehensive income/(loss) (Note 11)	(648		)	(607		)
Accumulated other comprehensive income/(loss) (Note 12)							(890		)	(800		)
Retained earnings	8,133			7,093			8,466			8,780
Total shareholder’s interest attributable to Ford Motor Credit Company	12,712			11,713			12,803			13,207
Shareholder’s interest attributable to noncontrolling interests	—			1			—			—
Total shareholder’s interest	12,712			11,714			12,803			13,207
Total liabilities and shareholder’s interest	$	142,992		$	137,448		$	146,089		$	149,532

The following table includes assets to be used to settle the liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheet above. See Notes 67 and 78 for additional information on our VIEs.


	September 30, 2016		December 31, 2015		December 31, 2016		March 31, 2017
	(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents	$	2,318	$	3,949	$	3,047	$	2,645
Finance receivables, net	47,627		45,902		50,857		52,860
Net investment in operating leases	9,951		13,309		11,761		12,325
Derivative financial instruments	7		85		25		29

LIABILITIES
Debt	$	39,123	$	43,086	$	43,730	$	42,960
Derivative financial instruments	10		19		5		4

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER’S INTEREST

(in millions, unaudited)


	Shareholder’s Interest Attributable to Ford Motor Credit Company																	Shareholder’s Interest Attributable to Ford Motor Credit Company
	Shareholder’s Interest		Accumulated Other Comprehensive Income/(Loss) (Note 11)			Retained Earnings			Total			Shareholder’s Interest Attributable to Non-Controlling Interests			Total Shareholder’s Interest			Shareholder’s Interest		Accumulated Other Comprehensive Income/(Loss) (Note 12)			Retained Earnings			Total			Shareholder’s Interest Attributable to Non-Controlling Interests		Total Shareholder’s Interest
Balance at December 31, 2015	$	5,227	$	(607	)	$	7,093		$	11,713		$	1		$	11,714		$	5,227	$	(607	)	$	7,093		$	11,713		$	1	$	11,714
Net income	—		—			1,040			1,040			—			1,040			—		—			358			358			—		358
Other comprehensive income/(loss), net of tax	—		(41		)	—			(41		)	—			(41		)	—		172			—			172			—		172
Distributions declared	—		—			—			—			(1		)	(1		)	—		—			—			—			—		—
Balance at September 30, 2016	$	5,227	$	(648	)	$	8,133		$	12,712		$	—		$	12,712
Balance at March 31, 2016																		$	5,227	$	(435	)	$	7,451		$	12,243		$	1	$	12,244

Balance at December 31, 2014	$	5,227	$	160		$	5,980		$	11,367		$	—		$	11,367
Balance at December 31, 2016																		$	5,227	$	(890	)	$	8,466		$	12,803		$	—	$	12,803
Net income	—		—			1,011			1,011			—			1,011			—		—			333			333			—		333
Other comprehensive income/(loss), net of tax	—		(562		)	—			(562		)	1			(561		)	—		90			—			90			—		90
Adoption of accounting standard (Note 2)																		—		—			9			9			—		9
Distributions declared	—		—			(56		)	(56		)	—			(56		)	—		—			(28		)	(28		)	—		(28		)
Balance at September 30, 2015	$	5,227	$	(402	)	$	6,935		$	11,760		$	1		$	11,761
Balance at March 31, 2017																		$	5,227	$	(800	)	$	8,780		$	13,207		$	—	$	13,207

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)


	For the periods ended September 30,						For the periods ended March 31,
	2016			2015			2016			2017
	First Nine Months						First Quarter
	(unaudited)						(unaudited)
Cash flows from operating activities
Net income	$	1,040		$	1,011
Adjustments to reconcile net income to net cash provided by operations
Provision for credit losses	403			239
Depreciation and amortization	3,763			3,256
Amortization of upfront interest supplements	(968		)	(786		)
Net change in deferred income taxes	315			860
Net change in other assets	(373		)	(280		)
Net change in other liabilities	480			(88		)
All other operating activities	147			110
Net cash provided by/(used in) operating activities	4,807			4,322			1,803			1,460

Cash flows from investing activities
Purchases of finance receivables (excluding wholesale and other)	(29,605		)	(30,275		)
Collections of finance receivables (excluding wholesale and other)	24,174			23,745
Purchases of finance receivables							(8,243		)	(9,388		)
Collections of finance receivables							7,760			8,880
Purchases of operating lease vehicles	(10,974		)	(10,902		)	(3,558		)	(3,270		)
Liquidations of operating lease vehicles	6,090			4,887			1,913			2,166
Net change in wholesale receivables and other	836			(1,521		)
Net change in wholesale receivables and other short-duration receivables							(2,124		)	(1,510		)
Purchases of marketable securities	(5,794		)	(7,745		)	(2,582		)	(1,883		)
Proceeds from sales and maturities of marketable securities	4,368			8,238			453			1,479
Settlements of derivatives	8			116			(13		)	22
All other investing activities	(152		)	21			(60		)	10
Net cash provided by/(used in) investing activities	(11,049		)	(13,436		)	(6,454		)	(3,494		)

Cash flows from financing activities
Proceeds from issuances of long-term debt	31,789			35,366			15,529			13,243
Principal payments on long-term debt	(29,499		)	(25,693		)	(9,216		)	(11,731		)
Change in short-term debt, net	905			634			(277		)	722
Cash distributions to parent	—			(56		)	—			(28		)
All other financing activities	(90		)	(84		)	(44		)	(37		)
Net cash provided by/(used in) financing activities	3,105			10,167			5,992			2,169

Effect of exchange rate changes on cash and cash equivalents	(74		)	(319		)	123			56

Net increase/(decrease) in cash and cash equivalents	$	(3,211	)	$	734		$	1,464		$	191

Cash and cash equivalents at January 1	$	8,886		$	6,179		$	8,886		$	8,077
Net increase/(decrease) in cash and cash equivalents	(3,211		)	734			1,464			191
Cash and cash equivalents at September 30	$	5,675		$	6,913
Cash and cash equivalents at March 31							$	10,350		$	8,268

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents



Footnote		Page
Note 1	~~Accounting Policies~~Presentation	6
Note 2	~~Cash, Cash Equivalents, and Marketable Securities~~Accounting Policies	76
Note 3	~~Finance Receivables~~Cash, Cash Equivalents, and Marketable Securities	8
Note 4	~~Net Investment in Operating Leases~~Finance Receivables	119
Note 5	~~Allowance for Credit Losses~~Net Investment in Operating Leases	12
Note 6	Allowance for Credit Losses	13
Note 7	Transfers of Receivables	14
Note 78	Variable Interest Entities	15
Note 89	Derivative Financial Instruments and Hedging Activities	16
Note 910	Other Assets and Other Liabilities and Deferred Income	18
Note 1011	Debt	19
Note 1112	Accumulated Other Comprehensive Income/(Loss)	19
Note 1213	Other Income, Net	20
Note 1314	Segment Information	21
Note 1415	Commitments and Contingencies	22

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries 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”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”).

We reclassified certain prior period amounts in our consolidated financial statements to conform to current year presentation.

NOTE 1.2. ACCOUNTING POLICIES

~~Principles of Consolidation~~

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries 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”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Form 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”).

Provision for Income Taxes

For interim tax reporting we estimate one single effective tax rate, which is applied to the year-to-date ordinary income/(loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

Adoption of New Accounting Standards

Accounting Standard Update (“ASU”) 2014-09,Revenue - Revenue from Contracts with Customers. We have adopted the new accounting standard, ASC 606 Revenue from Contracts with Customers and all the related amendments as of January 1, 2017 using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standard in effect for those periods. Adoption of the new revenue standard resulted in changes to the timing of revenue recognition and in the reclassification between financial statement line items. Under the new standard, we recognize insurance commissions at the time of sale of the product or service to our customer; previously, such income was recognized over the life of the insurance contract. The new standard also provided additional clarity that resulted in reclassifications from Other income, net toa new financial statement line entitled Fee based revenue and other.

We recognized the cumulative effect of initially applying the new standard as a $9 million increase to the opening balance of Retained earnings with the offset primarily reflected in Other assets. When compared to the previous standard, the impact of adopting the new standardwas immaterial to Other assets and Retained earnings at March 31, 2017 and Net income for the period ended March 31, 2017. Under the previous standard, amounts reported in Fee based revenue and other for the period ended March 31, 2017 would have been included in Other income, net.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. ACCOUNTING POLICIES (Continued)

We also adopted the following standards during ~~2016,~~2017, none of which ~~have~~had a material impact to our financial statements or financial statement disclosures:



Standard		Effective Date
~~2015-16~~2017-05	~~Business Combinations~~Gains and Losses from the Derecognition of Nonfinancial Assets - ~~Simplifying~~Clarifying the ~~Accounting for Measurement-Period Adjustments~~Scope of Asset Derecognition Guidance	January 1, ~~2016~~2017
~~2015-09~~2017-04	~~Insurance~~Goodwill and Other - ~~Disclosures about Short-Duration Contracts~~Simplifying the Test for Goodwill Impairment	January 1, ~~2016~~2017
~~2015-05~~2017-03	~~Internal-Use Software~~Accounting Changes and Error Corrections and Investments - ~~Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement~~Equity Method and Joint Ventures	January 1, ~~2016~~2017
~~2015-02~~2017-01	~~Consolidation~~Business Combinations - ~~Amendments to~~Clarifying the ~~Consolidation Analysis~~Definition of a Business	January 1, ~~2016~~2017
~~2015-01~~2016-17	~~Extraordinary and Unusual Items~~Consolidation - ~~Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items~~Interests Held through Related Parties That Are Under Common Control	January 1, ~~2016~~2017
~~2014-12~~2016-09	Stock Compensation - ~~Accounting for~~Improvements to Employee Share-Based ~~Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period~~Payment Accounting	January 1, ~~2016~~2017
2016-07	Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting	January 1, 2017
2016-06	Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments	January 1, 2017
2016-05	Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships	January 1, 2017
2016-04	Extinguishments of Liabilities - Recognition of Breakage for Certain Prepaid Stored-Value Products	January 1, 2017

Accounting Standards Issued But Not Yet Adopted

The following represent the standards that will, or are expected to, result in a significant change in practice and/or have a significant financial impact to Ford Credit.

~~Accounting Standard Update (“ASU”)~~ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. We are assessing the potential impact to our financial statements and disclosures.

ASU 2016-02, Leases. In February 2016, the FASB issued a new accounting standard which provides guidance on the recognition, measurement, presentation, and disclosure of leases. The new standard supersedes present U.S. GAAP guidance on leases and requires substantially all leases to be reported on the balance sheet as right-of-use assets and lease liabilities, as well as additional disclosures. The new standard is effective as of January 1, 2019, and early adoption is permitted. We are assessing the potential impact to our financial statements and disclosures.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

~~NOTE 1. ACCOUNTING POLICIES~~ ~~(Continued)~~

~~ASU 2014-09,Revenue - Revenue from Contracts with Customers.~~ In May 2014, the FASB issued a new accounting standard that requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The FASB has also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present standards. It also requires additional disclosures. We plan to adopt the new revenue guidance effective January 1, 2017 by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity. We do not expect a material impact to our financial statements or disclosures.

NOTE 2.3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The following table categorizes the fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis on our balance sheet (in millions):


	Fair Value Level	September 30, 2016		December 31, 2015		Fair Value Level	December 31, 2016		March 31, 2017
Cash and cash equivalents
U.S. government	1	$	—	$	—	1	$	924	$	749
U.S. government agencies	2	4		—		2	—		400
Non-U.S. government and agencies	2	280		266		2	142		283
Corporate debt	2	50		—		2	—		—
Total marketable securities classified as cash equivalents		334		266			1,066		1,432
Cash, time deposits and money market funds		5,341		8,620			7,011		6,836
Total cash and cash equivalents		$	5,675	$	8,886		$	8,077	$	8,268

Marketable securities
U.S. government	1	$	1,724	$	298	1	$	1,634	$	1,894
U.S. government agencies	2	1,354		1,169		2	505		459
Non-U.S. government and agencies	2	520		832		2	632		649
Corporate debt	2	540		384		2	475		657
Other marketable securities	2	42		40		2	34		28
Total marketable securities		$	4,180	$	2,723		$	3,280	$	3,687

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.4. FINANCE RECEIVABLES

We ~~segment~~manage finance receivables ~~into~~as “consumer” and “non-consumer” ~~receivables.~~portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables, net were as follows (in millions):


	September 30, 2016			December 31, 2015			December 31, 2016			March 31, 2017
Consumer
Retail financing, gross	$	67,894		$	62,068		$	68,121		$	69,342
Unearned interest supplements from Ford and affiliated companies	(2,785		)	(2,119		)	(2,783		)	(2,882		)
Consumer finance receivables	65,109			59,949			65,338			66,460

Non-Consumer
Dealer financing	35,226			36,037			36,951			38,746
Other financing	1,034			1,210			1,176			1,886
Non-Consumer finance receivables	36,260			37,247			38,127			40,632
Total recorded investment	$	101,369		$	97,196		$	103,465		$	107,092

Recorded investment in finance receivables	$	101,369		$	97,196		$	103,465		$	107,092
Allowance for credit losses	(478		)	(373		)	(484		)	(517		)
Finance receivables, net	$	100,891		$	96,823		$	102,981		$	106,575

Net finance receivables subject to fair value (a)	$	98,760		$	95,008		$	100,857		$	104,318
Fair value	100,054			96,180			101,576			104,948

__________

(a)

At ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015, excludes~~2017, Finance receivables, net includes $2.1 billion and $~~2.1~~2.3 billion ~~and $1.8 billion,~~, respectively, of ~~certain receivables (primarily~~ direct financing ~~leases)~~leases that are not subject to fair value disclosure requirements. The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Excluded from finance receivables at ~~September 30, 2016 and~~ December 31, ~~2015~~2016andMarch 31, 2017 was ~~$207~~$224 million and ~~$209~~$221 million, respectively, of accrued uncollected interest, which we report in Other assets on our balance sheet.

Included in recorded investment in finance receivables at ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015~~2017 were consumer receivables of ~~$29.9~~$32.5 billion and ~~$27.6~~$33.4 billion, respectively, and non-consumer receivables of ~~$23.3~~$26.0 billion and ~~$26.1~~$26.4 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Note 67 for additional information).

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.4. FINANCE RECEIVABLES (Continued)

Aging

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $21 million and $2418 million ~~and $16 million~~ at ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015,~~2017, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was de minimis ~~and $1 million~~ at~~September 30, 2016~~ ~~and~~ December 31, ~~2015, respectively.~~2016 and March 31, 2017.

The aging analysis of finance receivables balances was as follows (in millions):


	September 30, 2016		December 31, 2015		December 31, 2016		March 31, 2017
Consumer
31-60 days past due	$	652	$	708	$	760	$	654
61-90 days past due	112		108		114		85
91-120 days past due	36		27		34		29
Greater than 120 days past due	39		38		39		38
Total past due	839		881		947		806
Current	64,270		59,068		64,391		65,654
Consumer finance receivables	65,109		59,949		65,338		66,460

Non-Consumer
Total past due	71		116		107		106
Current	36,189		37,131		38,020		40,526
Non-Consumer finance receivables	36,260		37,247		38,127		40,632
Total recorded investment	$	101,369	$	97,196	$	103,465	$	107,092

Credit Quality

Consumer ~~Segment~~Portfolio

Credit quality ratings for consumer receivables are based on our aging analysis. Refer to the aging table above.

Consumer receivables credit quality ratings are as follows:

Pass – current to 60 days past due

Special Mention – 61 to 120 days past due and in intensified collection status

Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell

Non-Consumer ~~Segment~~Portfolio

Dealers are assigned to one of four groups according to risk ratings as follows:

Group I – strong to superior financial metrics

Group II – fair to favorable financial metrics

Group III – marginal to weak financial metrics

Group IV – poor financial metrics, including dealers classified as uncollectible

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.4. FINANCE RECEIVABLES (Continued)

The credit quality analysis of our dealer financing receivables was as follows (in millions):


	September 30, 2016		December 31, 2015		December 31, 2016		March 31, 2017
Dealer financing
Group I	$	27,851	$	27,054	$	29,926	$	31,196
Group II	5,847		7,185		5,552		5,952
Group III	1,403		1,687		1,380		1,449
Group IV	125		111		93		149
Total recorded investment	$	35,226	$	36,037	$	36,951	$	38,746

Impaired Receivables

Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be Troubled Debt Restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at ~~September 30, 2016~~ ~~and~~ December 31, ~~2015~~2016 and March 31, 2017 was $~~366~~367 million, or 0.6% of consumer receivables, and ~~$375~~$385 million,, or 0.6% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at ~~September 30, 2016~~ ~~and~~ December 31, ~~2015~~2016andMarch 31, 2017 was $~~140~~107 million, or ~~0.4%~~0.3% of non-consumer receivables, and ~~$134~~$164 million,, or 0.4% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on the principal balance of our receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven. Finance receivables involved in TDRs are specifically assessed for impairment.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4.5. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consist primarily of lease contracts for vehicles with retail customers, daily rental companies, ~~government entities,~~ and fleet customers with terms of 60 months or less.

Net investment in operating leases were as follows (in millions):


	September 30, 2016			December 31, 2015			December 31, 2016			March 31, 2017
Vehicles, at cost (a)	$	32,278		$	29,673		$	32,823		$	31,955
Accumulated depreciation	(5,254		)	(4,545		)	(5,550		)	(5,460		)
Net investment in operating leases before allowance for credit losses	27,024			25,128			27,273			26,495
Allowance for credit losses	(63		)	(49		)	(64		)	(67		)
Net investment in operating leases	$	26,961		$	25,079		$	27,209		$	26,428

__________


(a)	Includes interest supplements and residual support payments we receive on certain leasing transactions under agreements with Ford and affiliated companies, and other vehicle acquisition costs.

At ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015,~~2017, net investment in operating leases before allowance for credit losses includes ~~$10.0~~$11.8 billion and ~~$13.3~~$12.3 billion, respectively, of net investment in operating leases that have been included in securitization transactions but continue to be reported in our consolidated financial statements. These net investment in operating leases are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Note 67 for additional information).

We have a sale-leaseback agreement with Ford primarily for vehicles that Ford leases to employees of Ford and its subsidiaries. Effective January 1, 2017, the financing we provide under this agreement is reflected on our balance sheet in Finance receivables, net. Previously, these amounts were reflected in Net investment in operating leases. The amount included in Net investment in operating leases at December 31, 2016 was $907 million. The revenue related to these agreements is now reflected in Other financing revenue. Previously, this activity was reflected on our income statement in Operating leases revenue and Depreciation on vehicles subject to operating leases and for the period ended March 31, 2016 was $67 million and $61 million, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5.6. ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses related to finance receivables and net investment in operating leases for the periods ended ~~September 30~~March 31 (in millions) was as ~~follows (in millions):~~

Third Quarter 2016
Finance Receivables Net Investment in Operating Leases Total Allowance
Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 432
$ 17
$ 449
$ 63
$ 512
Charge-offs (108 ) (5 ) (113 ) (44 ) (157 )
Recoveries 29
1
30
20
50
Provision for credit losses 112
1
113
25
138
Other (a) (1 ) —
(1 ) (1 ) (2 )
Ending balance $ 464
$ 14
$ 478
$ 63
$ 541
follows:


	First Nine Months 2016																First Quarter 2016
	Finance Receivables									Net Investment in Operating Leases				Total Allowance			Finance Receivables								Net Investment in Operating Leases			Total Allowance
	Consumer			Non-Consumer			Total						Consumer					Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	357		$	16		$	373		$	49			$	422		$	357		$	16	$	373		$	49		$	422
Charge-offs	(304		)	(7		)	(311		)	(125		)		(436		)	(102		)	1		(101		)	(40		)	(141		)
Recoveries	89			4			93			60				153			29			1		30			19			49
Provision for credit losses	323			1			324			79				403			102			1		103			25			128
Other (a)	(1		)	—			(1		)	—				(1		)	4			1		5			—			5
Ending balance	$	464		$	14		$	478		$	63			$	541		$	390		$	20	$	410		$	53		$	463

Analysis of ending balance of allowance for credit losses
Collective impairment allowance	$	445		$	12		$	457		$	63			$	520		$	371		$	13	$	384		$	53		$	437
Specific impairment allowance	19			2			21			—				21			19			7		26			—			26
Ending balance	464			14			478			63				$	541		390			20		410			53			$	463

Analysis of ending balance of finance receivables and net investment in operating leases
Collectively evaluated for impairment	64,743			36,120			100,863			27,024							60,581			39,583		100,164			25,941
Specifically evaluated for impairment	366			140			506			—							373			149		522			—
Recorded investment	65,109			36,260			101,369			27,024							60,954			39,732		100,686			25,941

Ending balance, net of allowance for credit losses	$	64,645		$	36,246		$	100,891		$	26,961						$	60,564		$	39,712	$	100,276		$	25,888

__________


(a)	Primarily represents amounts related to translation adjustments.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 5. ALLOWANCE FOR CREDIT LOSSES~~ ~~(Continued)~~

Third Quarter 2015
Finance Receivables Net Investment in Operating Leases Total Allowance
Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 322
$ 13
$ 335
$ 45
$ 380
Charge-offs (85 ) (2 ) (87 ) (31 ) (118 )
Recoveries 29
1
30
15
45
Provision for credit losses 80
2
82
18
100
Other (a) (4 ) —
(4 ) —
(4 )
Ending balance $ 342
$ 14
$ 356
$ 47
$ 403


	First Nine Months 2015																First Quarter 2017
	Finance Receivables									Net Investment in Operating Leases				Total Allowance			Finance Receivables									Net Investment in Operating Leases			Total Allowance
	Consumer			Non-Consumer			Total						Consumer					Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	305		$	16		$	321		$	38			$	359		$	469		$	15		$	484		$	64		$	548
Charge-offs	(235		)	(3		)	(238		)	(87		)		(325		)	(123		)	(2		)	(125		)	(52		)	(177		)
Recoveries	90			4			94			46				140			34			—			34			24			58
Provision for credit losses	190			(2		)	188			51				239			121			—			121			31			152
Other (a)	(8		)	(1		)	(9		)	(1		)		(10		)	3			—			3			—			3
Ending balance	$	342		$	14		$	356		$	47			$	403		$	504		$	13		$	517		$	67		$	584

Analysis of ending balance of allowance for credit losses
Collective impairment allowance	$	323		$	12		$	335		$	47			$	382		$	483		$	13		$	496		$	67		$	563
Specific impairment allowance	19			2			21			—				21			21			—			21			—			21
Ending balance	342			14			356			47				$	403		504			13			517			67			$	584

Analysis of ending balance of finance receivables and net investment in operating leases
Collectively evaluated for impairment	58,749			33,783			92,532			24,557							66,075			40,468			106,543			26,495
Specifically evaluated for impairment	375			129			504			—							385			164			549			—
Recorded investment	59,124			33,912			93,036			24,557							66,460			40,632			107,092			26,495

Ending balance, net of allowance for credit losses	$	58,782		$	33,898		$	92,680		$	24,510						$	65,956		$	40,619		$	106,575		$	26,428

__________


(a)	Primarily represents amounts related to translation adjustments.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6.7. TRANSFERS OF RECEIVABLES

We securitize finance receivables and net investment in operating leases through a variety of programs using amortizing, variable funding, and revolving structures. We also sell finance receivables in structured financing transactions. Due to the similarities between securitization and structured financing, we refer to structured financings as securitization transactions. Our securitization programs are targeted to institutional investors in both public and private transactions in capital markets including the United States, Canada, several European countries, Mexico, and China.

We engage in securitization transactions to fund operations and to maintain liquidity. Our securitization transactions are recorded as asset-backed debt and the associated assets are not derecognized and continue to be included in our financial statements.

The finance receivables sold for legal purposes and net investment in operating leases included in securitization transactions are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. They are not available to pay our other obligations or the claims of our other creditors. We hold the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. The debt is the obligation of our consolidated securitization entities and not the obligation of Ford Credit or our other subsidiaries.

Most of these securitization transactions utilize VIEs. See Note 78 for additional information concerning VIEs. The following tables show the assets and debt related to our securitization transactions that were included in our financial statements (in billions):

September 30, 2016
Cash and Cash Equivalents Finance Receivables and Net Investment in Operating Leases (a) Related Debt (c)

Before Allowance
for Credit Losses

Allowance for
Credit Losses

After Allowance
for Credit Losses

VIE (b)
Retail financing $ 1.5
$ 25.2
$ 0.2
$ 25.0
$ 21.8
Wholesale financing 0.3
22.6
—
22.6
11.1
Finance receivables 1.8
47.8
0.2
47.6
32.9
Net investment in operating leases 0.5
10.0
—
10.0
6.2
Total VIE $ 2.3
$ 57.8
$ 0.2
$ 57.6
$ 39.1

Non-VIE
Retail financing $ 0.3
$ 4.7
$ —
$ 4.7
$ 4.4
Wholesale financing —
0.7
—
0.7
0.6
Finance receivables 0.3
5.4
—
5.4
5.0
Net investment in operating leases —
—
—
—
—
Total Non-VIE $ 0.3
$ 5.4
$ —
$ 5.4
$ 5.0

Total securitization transactions
Retail financing $ 1.8
$ 29.9
$ 0.2
$ 29.7
$ 26.2
Wholesale financing 0.3
23.3
—
23.3
11.7
Finance receivables 2.1
53.2
0.2
53.0
37.9
Net investment in operating leases 0.5
10.0
—
10.0
6.2
Total securitization transactions $ 2.6
$ 63.2
$ 0.2
$ 63.0
$ 44.1

~~__________~~


~~(a)~~	~~Unearned interest supplements and residual support are excluded from securitization transactions.~~


~~(b)~~	~~Includes assets to be used to settle the liabilities of the consolidated VIEs.~~


~~(c)~~	~~Includes unamortized discount and debt issuance costs.~~

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 6. TRANSFERS OF RECEIVABLES~~ ~~(Continued)~~


	December 31, 2015										December 31, 2016
	Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)		Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
	Cash and Cash Equivalents		Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses		Related Debt (c)		Cash and Cash Equivalents		Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses		Related Debt (c)
VIE (b)
Retail financing	$	1.4	$	20.9	$	0.1	$	20.8	$	18.9	$	1.5	$	25.9	$	0.2	$	25.7	$	22.7
Wholesale financing	2.0		25.1		—		25.1		15.3		1.0		25.2		—		25.2		13.6
Finance receivables	3.4		46.0		0.1		45.9		34.2		2.5		51.1		0.2		50.9		36.3
Net investment in operating leases	0.5		13.3		—		13.3		8.9		0.5		11.8		—		11.8		7.4
Total VIE	$	3.9	$	59.3	$	0.1	$	59.2	$	43.1	$	3.0	$	62.9	$	0.2	$	62.7	$	43.7

Non-VIE
Retail financing	$	0.4	$	6.7	$	—	$	6.7	$	6.1	$	0.4	$	6.6	$	—	$	6.6	$	6.1
Wholesale financing	—		1.0		—		1.0		0.8		—		0.8		—		0.8		0.6
Finance receivables	0.4		7.7		—		7.7		6.9		0.4		7.4		—		7.4		6.7
Net investment in operating leases	—		—		—		—		—		—		—		—		—		—
Total Non-VIE	$	0.4	$	7.7	$	—	$	7.7	$	6.9	$	0.4	$	7.4	$	—	$	7.4	$	6.7

Total securitization transactions
Retail financing	$	1.8	$	27.6	$	0.1	$	27.5	$	25.0	$	1.9	$	32.5	$	0.2	$	32.3	$	28.8
Wholesale financing	2.0		26.1		—		26.1		16.1		1.0		26.0		—		26.0		14.2
Finance receivables	3.8		53.7		0.1		53.6		41.1		2.9		58.5		0.2		58.3		43.0
Net investment in operating leases	0.5		13.3		—		13.3		8.9		0.5		11.8		—		11.8		7.4
Total securitization transactions	$	4.3	$	67.0	$	0.1	$	66.9	$	50.0	$	3.4	$	70.3	$	0.2	$	70.1	$	50.4

__________


(a)	Unearned interest supplements and residual support are excluded from securitization transactions.


(b)	Includes assets to be used to settle the liabilities of the consolidated VIEs.


(c)	Includes unamortized discount and debt issuance costs.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. TRANSFERS OF RECEIVABLES (Continued)



	March 31, 2017
	Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
	Cash and Cash Equivalents		Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses		Related Debt (c)
VIE (b)
Retail financing	$	1.7	$	27.5	$	0.2	$	27.3	$	24.3
Wholesale financing	0.3		25.6		—		25.6		10.6
Finance receivables	2.0		53.1		0.2		52.9		34.9
Net investment in operating leases	0.6		12.3		—		12.3		8.1
Total VIE	$	2.6	$	65.4	$	0.2	$	65.2	$	43.0

Non-VIE
Retail financing	$	0.4	$	5.9	$	—	$	5.9	$	5.3
Wholesale financing	—		0.8		—		0.8		0.6
Finance receivables	0.4		6.7		—		6.7		5.9
Net investment in operating leases	—		—		—		—		—
Total Non-VIE	$	0.4	$	6.7	$	—	$	6.7	$	5.9

Total securitization transactions
Retail financing	$	2.1	$	33.4	$	0.2	$	33.2	$	29.6
Wholesale financing	0.3		26.4		—		26.4		11.2
Finance receivables	2.4		59.8		0.2		59.6		40.8
Net investment in operating leases	0.6		12.3		—		12.3		8.1
Total securitization transactions	$	3.0	$	72.1	$	0.2	$	71.9	$	48.9

__________


(a)	Unearned interest supplements and residual support are excluded from securitization transactions.


(b)	Includes assets to be used to settle the liabilities of the consolidated VIEs.


(c)	Includes unamortized discount and debt issuance costs.

NOTE 7.8. VARIABLE INTEREST ENTITIES

VIEs of Which We Are the Primary Beneficiary

We use special purpose entities to issue asset-backed securities in transactions to public and private investors. We have deemed most of these special purpose entities to be VIEs. The asset-backed securities are backed by finance receivables and interests in net investments in operating leases. The assets continue to be consolidated by us. We retain interests in our securitization VIEs, including subordinated securities issued by the VIEs, rights to cash held for the benefit of the securitization investors, and rights to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

We have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to us or our other assets and have no right to require us to repurchase the investments. We generally have no obligation to provide liquidity or contribute cash or additional assets to the VIEs and do not guarantee any asset-backed securities. We may be required to support the performance of certain securitization transactions, however, by increasing cash reserves.

See Note 67 for additional information on the financial position and financial performance of our VIEs.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7.8. VARIABLE INTEREST ENTITIES (Continued)

VIEs of Which We Are Not the Primary Beneficiary

We have an investment in Forso Nordic AB, a joint venture determined to be a VIE of which we are not the primary beneficiary. The joint venture provides retail and dealer financing in its local markets and is financed by external debt and additional subordinated debt provided by the joint venture partner. The operating agreement indicates that the power to direct economically significant activities is shared with the joint venture partner, and the obligation to absorb losses or right to receive benefits resides primarily with the joint venture partner. Our investment in the joint venture is accounted for as an equity method investment and is included in Other assets. Our maximum exposure to any potential losses associated with this VIE is limited to our equity investment and amounted to $68 million and $70 million ~~and $66 million~~ at~~September 30, 2016~~ ~~and~~ December 31, ~~2015,~~2016 and March 31, 2017, respectively.

NOTE 8.9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, recorded in income for the periods ended ~~September 30~~March 31 were as follows (in millions):


	Third Quarter						First Nine Months						First Quarter
	2016			2015			2016			2015			2016			2017
Fair value hedges
Interest rate contracts
Net interest settlements and accruals excluded from the assessment of hedge effectiveness	$	95		$	94		$	292		$	271		$	99		$	70
Ineffectiveness (a)	(1		)	10			21			6			17			(4		)
Derivatives not designated as hedging instruments
Interest rate contracts	21			(22		)	(70		)	(83		)	(48		)	7
Foreign currency exchange contracts	37			40			129			40			33			(29		)
Cross-currency interest rate swap contracts	128			63			463			75			195			58
Total	$	280		$	185		$	835		$	309		$	296		$	102

__________

(a)

For the ~~third~~first quarter ~~and first nine months~~ of 2016 and 2017, hedge ineffectiveness reflects the net change in fair value on derivatives of ~~$228~~$610 million ~~loss~~gain and ~~$655~~$89 million ~~gain,~~loss, respectively, and change in value on hedged debt attributable to the change in benchmark interest rates of $227 million gain and $634 million loss, respectively. For the third quarter and first nine months of 2015, hedge ineffectiveness reflects the net change in fair value on derivatives of $373 million gain and $345 million gain, respectively, and change in value on hedged debt attributable to the change in benchmark interest rates of $363$593 million loss and ~~$339~~$85 million ~~loss,~~gain, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8.9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are recorded on the balance sheet at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of ~~exposure~~exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties which we do not use to offset our derivative assets and liabilities.

The fair value of our derivative instruments and the associated notional amounts, presented gross, were as follows (in millions):


	September 30, 2016						December 31, 2015						December 31, 2016						March 31, 2017
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Fair value hedges
Interest rate contracts	$	36,215	$	1,217	$	—	$	28,964	$	670	$	16	$	33,175	$	487	$	80	$	35,904	$	372	$	175
Derivatives not designated as hedging instruments
Interest rate contracts	61,650		142		122		62,638		159		112		61,689		156		74		56,414		136		71
Foreign currency exchange contracts (a)	1,474		115		1		1,713		22		4		1,791		24		4		1,756		—		9
Cross-currency interest rate swap contracts	3,765		383		—		3,137		73		111		3,201		242		8		3,230		298		—
Total derivative financial instruments, gross (b) (c)	$	103,104	1,857		123		$	96,452	924		243		$	99,856	$	909	$	166	$	97,304	$	806	$	255

__________


(a)	Includes forward contracts between Ford Credit and an affiliated company.


(b)	At ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015, the net obligation to return cash~~2017, we held collateral ~~was $10~~of $15 million and ~~$0,~~$19 million, and we posted collateral of $12 million and $10 million, respectively.


(c)	At ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015,~~2017, the fair value of assets and liabilities available for counterparty netting was ~~$87~~$113 million and ~~$167~~$153 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9.10. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED INCOME

Other assets and other liabilities and deferred income consist of various balance sheet items that are combined for financial statement presentation due to their respective materiality compared with other individual asset and liability items.

Other assets were as follows (in millions):


	September 30, 2016		December 31, 2015		December 31, 2016		March 31, 2017
Accrued interest and other non-finance receivables	$	856	$	763	$	889	$	917
Prepaid reinsurance premiums and other reinsurance receivables	531		472		546		563
Collateral held for resale, at net realizable value	477		498		621		530
Deferred charges – income taxes					205		205
Investment in non-consolidated affiliates					153		165
Property and equipment, net of accumulated depreciation (a)	152		142		156		161
Investment in non-consolidated affiliates	151		133
Deferred charges – income taxes	141		135
Deferred charges					122		125
Restricted cash (b)	116		56		108		89
Deferred charges	67		63
Other	24		24		22		30
Total other assets	$	2,515	$	2,286	$	2,822	$	2,785

__________


(a)	Accumulated depreciation was $347 million and ~~$335~~$353 million at~~September 30, 2016~~ ~~and~~ December 31, ~~2015,~~2016 and March 31, 2017, respectively.


(b)	Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

Other liabilities and deferred income were as follows (in millions):


	September 30, 2016		December 31, 2015		December 31, 2016		March 31, 2017
Unearned insurance premiums	$	543	$	484
Unearned insurance premiums and fees					$	650	$	668
Interest payable	530		553		661		526
Tax related payables to Ford and affiliated companies	89		105
Unrecognized tax benefits	85		75
Income tax and related interest					294		295
Deferred revenue					143		153
Payroll and employee benefits					51		40
Other	440		448		198		216
Total other liabilities and deferred income	$	1,687	$	1,665	$	1,997	$	1,898

Deferred revenue balances presented above include amounts from contracts with customers primarily related to admission fee revenue on group financing products available in Argentina and were $120 million, $120 million, and $130 million at December 31, 2016, January 1, 2017, and March 31, 2017, respectively. The January 1, 2017 balance reflects adoption of the new revenue recognition standard. See Note 2 for additional information.

Admission fee revenue on group financing products is generally recognized evenly over the term of the agreement, which is up to 84 months. Increases in the admission fee deferred revenue balance are the result of payments due during the current period in advance of satisfying our performance under the contract and decreases are a result of revenue recognized during the current period that was previously deferred. The total amount of admission fee revenue recognized in the first quarter of 2017 that was included in the beginning balance of deferred revenue at January 1, 2017 was $7 million.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~10.~~11. DEBT

Debt outstanding and interest rates were as follows (in millions):


							Interest Rates														Interest Rates
	Debt						Average Contractual				Average Effective				Debt						Average Contractual				Average Effective
	September 30, 2016			December 31, 2015			2016		2015		2016		2015		December 31, 2016			March 31, 2017			2016		2017		2016		2017
Short-term debt
Unsecured debt
Floating rate demand notes	$	6,016		$	5,926										$	5,986		$	6,147
Commercial paper	4,507			1,722											4,507			4,986
Other short-term debt	2,068			2,708											3,803			4,498
Asset-backed debt	407			1,855											1,063			576
Total short-term debt	12,998			12,211			1.9	%	1.6	%	1.9	%	1.6	%	15,359			16,207			2.3	%	2.3	%	2.3	%	2.3	%
Long-term debt
Unsecured debt
Notes payable within one year	12,599			10,254											12,369			11,777
Notes payable after one year	53,381			48,672											49,308			52,890
Asset-backed debt (a)
Notes payable within one year	19,263			18,855											19,286			18,228
Notes payable after one year	24,477			29,390											30,112			30,155
Unamortized discount	(5		)	(25		)									(8		)	(7		)
Unamortized issuance costs	(231		)	(214		)									(212		)	(224		)
Fair value adjustments (b)	1,055			458											278			184
Total long-term debt	110,539			107,390			2.5	%	2.3	%	2.5	%	2.4	%	111,133			113,003			2.4	%	2.4	%	2.5	%	2.5	%
Total debt	$	123,537		$	119,601		2.4	%	2.2	%	2.5	%	2.3	%	$	126,492		$	129,210		2.4	%	2.4	%	2.4	%	2.5	%

Fair value of debt (c)	$	125,409		$	120,546										$	128,001		$	131,748

__________


(a)	Asset-backed debt issued in securitizations is the obligation of the consolidated securitization entity that issued the debt and is payable only out of collections on the underlying securitized assets and related enhancements. This asset-backed debt is not the obligation of Ford Credit or our other subsidiaries.


(b)	Adjustments related to designated fair value hedges of unsecured debt.


(c)	The fair value of debt includes ~~$12.6~~$14.3 billion and ~~$10.4~~$15.6 billion of short-term debt at ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015,~~2017, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

NOTE ~~11.~~12. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in the balance of Accumulated ~~Other Comprehensive Income/(Loss)~~other comprehensive income/(loss) (“AOCI”) attributable to Ford Credit for the periods ended ~~September 30~~March 31 were as follows (in millions):


	Third Quarter						First Nine Months						First Quarter
	2016			2015			2016			2015			2016			2017
Foreign currency translation
Beginning balance	$	(576	)	$	(127	)	$	(607	)	$	160		$	(607	)	$	(890	)
Net gain/(loss) on foreign currency translation	(72		)	(275		)	(41		)	(562		)	172			90
Other comprehensive income/(loss), net of tax	(72		)	(275		)	(41		)	(562		)	172			90
Ending balance	$	(648	)	$	(402	)	$	(648	)	$	(402	)	$	(435	)	$	(800	)

Total AOCI ending balance at September 30	$	(648	)	$	(402	)	$	(648	)	$	(402	)
Total AOCI ending balance at March 31													$	(435	)	$	(800	)

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~12.~~13. OTHER INCOME, NET

Other income consists of various line items that are combined on the income statement due to their respective materiality compared with other individual income and expense items.

The amounts included in Other income, net ~~were as follows~~ for the periods ended ~~September 30~~March 31 were as follows (in millions):


	Third Quarter						First Nine Months						First Quarter
	2016			2015			2016			2015			2016			2017
Gains/(Losses) on derivatives	$	186		$	92		$	545		$	37		$	199		$	32
Currency revaluation gains/(losses)	(157		)	(106		)	(585		)	(117		)	(219		)	(34		)
Interest and investment income	19			30			71			75			28			23
Insurance fee income	21			25			68			63			21			—
Other	40			37			125			121			34			9
Total other income, net	$	109		$	78		$	224		$	179		$	63		$	30

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~13.~~14. SEGMENT INFORMATION

~~We divide~~Beginning with the first quarter of 2017, we have three reportable segments in our consolidated financial statements to align with our new management reporting structure and reflect the manner in which our Chief Operating Decision Maker manages our business, including resource allocation and performance assessment. These segments ~~based~~are: the Americas, Europe, and Asia Pacific. Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on ~~geographic regions: North America (“North America Segment”) and International (“International Segment”).~~foreign currency-denominated transactions, are reflected in Unallocated Other. The ~~North America Segment includes~~following is a brief description of our ~~operations in the United States and Canada. The International Segment includes our operations in all other countries in which we do business directly and indirectly.~~segments:

•Americas Segment -- United States, Canada, Mexico, Brazil, and Argentina

•Europe Segment -- European region and South Africa

•Asia Pacific Segment -- China and India

We conduct our financing operations directly and indirectly through our subsidiaries and affiliates.

Key operating data for our business segments for the periods ended or at ~~September 30~~March 31 were as follows (in millions):


					Unallocated/Eliminations											Americas		Europe		Asia Pacific		Total Segments		Unallocated Other (a)			Total
	North America Segment		International Segment		Unallocated Risk Management			Adjustment to Receivables (a)			Total Unallocated/Eliminations			Total
Third Quarter 2016
Total revenue (b)	$	2,340	$	411	$	45		$	—		$	45		$	2,796
Income before income taxes	398		124		45			—			45			567
Other disclosures:
Depreciation on vehicles subject to operating leases	1,072		13		—			—			—			1,085
Interest expense	552		145		—			—			—			697
Provision for credit losses	122		16		—			—			—			138

Third Quarter 2015
Total revenue (b)	$	2,054	$	421	$	3		$	—		$	3		$	2,478
Income before income taxes	415		123		3			—			3			541
Other disclosures:
Depreciation on vehicles subject to operating leases	947		9		—			—			—			956
Interest expense	431		151		—			—			—			582
Provision for credit losses	84		16		—			—			—			100

First Nine Months 2016
First Quarter 2016
Total revenue (b)	$	6,830	$	1,252	$	10		$	—		$	10		$	8,092	$	2,279	$	251	$	85	$	2,615	$	(7	)	$	2,608
Income before income taxes	1,089		382		10			—			10			1,481		423		81		17		521		(7		)	514
Other disclosures:
Depreciation on vehicles subject to operating leases	3,149		25		—			—			—			3,174		1,008		6		—		1,014		—			1,014
Interest expense	1,593		437		—			—			—			2,030		533		70		43		646		—			646
Provision for credit losses	356		47		—			—			—			403		113		10		5		128		—			128
Net finance receivables and net investment in operating leases	109,664		24,761		—			(6,573		)	(6,573		)	127,852		107,176		20,612		4,042		131,830		(5,666		)	126,164
Total assets	114,461		28,531		—			—			—			142,992		117,856		23,775		4,543		146,174		—			146,174

First Nine Months 2015
First Quarter 2017
Total revenue (b)	$	5,902	$	1,231	$	(35	)	$	—		$	(35	)	$	7,098	$	2,405	$	228	98		$	2,731	$	—		$	2,731
Income before income taxes	1,200		365		(35		)	—			(35		)	1,530		358		77		28		463		18			481
Other disclosures:
Depreciation on vehicles subject to operating leases	2,607		23		—			—			—			2,630		1,053		11		—		1,064		—			1,064
Interest expense	1,361		458		—			—			—			1,819		617		61		51		729		—			729
Provision for credit losses	199		40		—			—			—			239		144		6		2		152		—			152
Net finance receivables and net investment in operating leases	99,241		23,139		—			(5,190		)	(5,190		)	117,190		114,171		20,840		4,947		139,958		(6,955		)	133,003
Total assets	104,067		27,423		—			—			—			131,490		119,990		23,906		5,636		149,532		—			149,532

__________


(a)	~~Includes~~ Net finance receivables and Net investment in operating leases include unearned interest supplements and residual support, ~~allowances~~allowance for credit losses, and other (primarily accumulated supplemental depreciation).

(b)

~~Represents~~Total revenue for 2016 includes Total financing revenue, Insurance premiums earned,, andOther income, net. For 2017, Total revenue includes Total financing revenue, Insurance premiums earned, and Fee based revenue and other. The change in the definition of Total revenue is the result of our adoption of the new revenue recognition accounting standard as of January 1, 2017 (see Note 2 for additional information).

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~14.~~15. COMMITMENTS AND CONTINGENCIES

Commitments and contingencies primarily consist of lease commitments, guarantees and indemnifications, and litigation and claims.

Guarantees and Indemnifications

Guarantees and indemnifications are recorded at fair value at their inception. We regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded.

In some cases, we have guaranteed debt and other financial obligations of outside third parties and unconsolidated affiliates, including Ford. Expiration dates vary, and guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be triggered by failure of the guaranteed party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from Ford, an affiliate of Ford, or a third party amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full, and may be limited in the event of insolvency of the third party or other circumstances.

In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights; governmental regulations and employment-related matters; dealer and other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities generally would be triggered by a breach of terms of the contract or by a third-party claim. While some of these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.

The maximum potential payments under these guarantees and limited indemnities totaled ~~$41~~$35 million and $8034 million at ~~September 30, 2016~~ ~~and~~ December 31, ~~2015,~~2016 and March 31, 2017, respectively. Of these values, ~~$37~~$31 millionand $7430 million at ~~September 30, 2016~~ ~~and~~ December 31, ~~2015,~~2016 and March 31, 2017, respectively, were counter-guaranteed by Ford to us. There were no recorded liabilities related to guarantees and limited indemnities at ~~September 30,~~December 31, 2016 and ~~December~~March 31, ~~2015.~~2017.

Litigation and Claims

Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against us. These include but are not limited to matters arising out of governmental regulations; tax matters; alleged illegal acts resulting in fines or penalties; financial services; employment-related matters; dealer and other contractual relationships; personal injury matters; investor matters; and financial reporting matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the matters involve or may involve claims for compensatory, punitive, or antitrust or other treble damages in very large amounts, sanctions, assessments, or other relief, which, if granted, would require very large expenditures.

The extent of our financial exposure to these matters is difficult to estimate. Many matters do not specify a dollar amount for damages, and many others specify only a jurisdictional minimum. To the extent an amount is asserted, our historical experience suggests that in most instances the amount asserted is not a reliable indicator of the ultimate outcome.

We accrue for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood that we will prevail, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over time.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~14.~~15. COMMITMENTS AND CONTINGENCIES (Continued)

For nearly all of our matters, where our historical experience with similar matters is of limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably to us and could require us to pay damages or make other expenditures. We do not reasonably expect, based on our analysis, that such matters would have a material effect on future financial statements for a particular year, although such an outcome is possible.

As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of any matter could require payment substantially in excess of the amount that we have accrued and/or disclosed.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of

Ford Motor Credit Company LLC:

We have reviewed the accompanying consolidated balance sheet of Ford Motor Credit Company LLC and its subsidiaries ~~(the “Company”)~~as of ~~September 30, 2016,~~March 31, 2017, and the related consolidated statements of income and comprehensive income for the ~~three-month and nine-month~~three month periods ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~ and the consolidated statements of shareholder’s interest and condensed consolidated statement of cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2016~~March 31, 2017 and ~~2015.~~2016. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, ~~2015,~~2016, and the related consolidated statements of income, comprehensive income, shareholder’s interest, and cash flows for the year then ended (not presented herein), and in our report dated February ~~11, 2016,~~9, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, ~~2015,~~2016, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Detroit, Michigan

~~October~~April 27, ~~2016~~2017

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Overview

In general, we measure period-to-period changes in pre-tax results using the causal factors listed below:

Volume and Mix – Volume and Mix are primarily reflected within Net financing margin on the income statement.

◦

Volume primarily measures changes in net financing margin driven by changes in average managed receivables at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicle sales and leases, the extent to which we purchase retail installment sale and lease contracts, the extent to which we provide wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through us, and the availability of cost-effective funding for the purchase of retail installment sale and lease contracts and to provide wholesale financing.


◦	Mix primarily measures changes in net financing margin driven by period over period changes in the composition of our average managed receivables by product and by country or region.

Financing Margin – Financing Margin is reflected within Net financing margin on the income statement.

◦

Financing margin variance is the period-to-period change in financing margin yield multiplied by the present period average managed receivables at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average managed receivables for the same period.


◦	Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management.

Credit Loss – Credit Loss is reflected within the Provision for credit losses on the income statement.


◦	Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses.

◦

Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of our present portfolio, changes in trends in historical used vehicle values, and changes in economic conditions. For additional information, ~~on the allowance for credit losses,~~ refer to the “Critical Accounting Estimates – Allowance for Credit Losses” section of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report.

Lease Residual – Lease Residual is reflected within Depreciation on vehicles subject to operating leases on the income statement.


◦	Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation.

◦

Residual gain and loss changes are primarily driven by the number of vehicles returned to us and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in our estimate of the expected auction value at the end of the lease term, and changes in our estimate of the number of vehicles that will be returned to us and sold. For additional information, ~~on accumulated supplemental depreciation,~~ refer to the “Critical Accounting ~~Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases”~~Estimates” section of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report.

Exchange – Reflects changes in pre-tax results driven by the effects of converting functional currency income to U.S. dollars and is reflected in all lines on the income statement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Other – Primarily includes Operating expenses, Other revenue, ~~and~~ Insurance expenses, and Other income, net on the income statement at prior period exchange rates.


◦	Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts.


◦	In general, ~~other revenue~~Other income, net changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates), which are included in ~~unallocated risk management,~~Unallocated Other, and other miscellaneous items.

In addition, the following definitions and calculations apply to the charts contained in Item 2 of this report:

~~Third~~Cash (as shown on the Funding Structure, Liquidity Sources, and Leverage charts) – Cash and cash equivalents and Marketable securities reported on Ford Credit’s balance sheet, excluding amounts related to insurance activities

Securitizations (as shown on the Public Term Funding Plan chart) – Public securitization transactions, Rule 144A offerings sponsored by Ford Motor Credit, and widely distributed offerings by Ford Credit Canada

Term Asset-Backed Securities (as shown on the Funding Structure chart) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements

Total Debt (as shown on the Leverage chart) – Debt on Ford Credit’s balance sheet. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions

Unallocated Other (as shown on the Pre-Tax Results by Segment chart) – Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

First Quarter ~~2016~~2017 Compared with ~~Third~~First Quarter ~~2015~~2016

The following chart shows our key metrics:

In the ~~third~~first quarter of ~~2016, pre-tax profit was strong - the best quarterly profit since 2011 -- and~~2017, receivables were higher than a year ago, ~~in line with expectations.~~while pre-tax profit was lower, as expected.

~~Our~~Overall, the portfolio ~~performance~~continued to perform as expected. FICO scores remained ~~robust, despite higher LTRs.~~consistent, and the over-60-day delinquency ratio of 16 basis points continued to be at the low end of our historical experience. The loss-to-receivables ratio of 54 basis points, up 10 basis points, was also below, but approaching, Ford Credit’s historical experience.

~~Our originations,~~Origination, servicing, and ~~collections~~collection practices remained disciplined and consistent.

~~As shown below the chart, year-to-date key metrics were unfavorable compared with a year ago.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

On a pre-tax basis, we earned ~~$567~~$481 million in the ~~third~~first quarter of ~~2016,~~2017, compared with ~~$541~~$514 million a year ago. The following chart shows the factors that contributed to the strong ~~third~~first quarter pre-tax profit:

Ford Credit’s first quarter pre-tax profit ~~improvement~~compared with 2016 is ~~explained primarily~~lower, driven by ~~favorable volume, mix, and market valuation adjustments to derivatives. Partial offsets include~~ unfavorable lease residual performance ~~and~~in the U.S., mainly higher ~~credit losses.~~

~~The favorable volume and mix was driven by growth in all products globally.~~

~~Lease residual performance reflects higher~~supplemental depreciation in ~~North America related~~response to expected lower auction values in the lease portfolio.

~~Credit loss performance~~The favorable volume and mix reflects primarily ~~reflects higher charge-offs as a result of higher defaults and severities~~growth in ~~North America.~~

retail receivables globally.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Beginning with the first quarter of 2017, we have three reportable segments in our consolidated financial statements to align with our new management reporting structure and reflect the manner in which our Chief Operating Decision Maker manages our business, including resource allocation and performance assessment. These segments are: the Americas, Europe, and Asia Pacific. Items excluded in assessing segment performance because they are managed at the corporate level are reflected in Unallocated Other. Results of operations by ~~business~~ segment and ~~unallocated risk management~~Unallocated Other for the ~~periods~~period ended ~~September 30~~March 31 are shown below (in millions). For additional information, see Note 1314 of our Notes to the Financial Statements.

Third Quarter First Nine Months
2015 2016 2016
Over/(Under)
2015 2015 2016 2016
Over/(Under)
2015
Income before income taxes
North America Segment $ 415
$ 398
$ (17 ) $ 1,200
$ 1,089
$ (111 )
International Segment 123
124
1
365
382
17
Unallocated risk management 3
45
42
(35 ) 10
45
Income before income taxes $ 541
$ 567
$ 26
$ 1,530
$ 1,481
$ (49 )

~~North America~~Americas Segment

The ~~North America Segment’s lower~~Americas Segment first quarter 2017 pre-tax profit ~~for the third quarter~~is lower compared with 2016 and ~~first nine months of 2016~~ is ~~primarily~~more than explained by unfavorable lease residual performance and higher credit ~~losses, partially offset by favorable volume and mix.~~losses. The unfavorable lease residual performance primarily reflects higher supplemental depreciation related to expected lower auction values in the lease ~~portfolio and~~portfolio. The credit ~~loss performance reflects~~losses reflect higher charge-offs ~~as a result of higher~~driven by increased defaults and ~~severities. The favorable volume and mix was driven by~~higher severities as well as the growth in ~~all products.~~receivables.

~~International~~Europe Segment

The ~~International Segment’s~~Europe Segment first quarter 2017 pre-tax profit ~~for the third quarter and first nine months of~~compared with 2016 is largely unchanged.

Asia Pacific Segment

The ~~result~~Asia Pacific Segment first quarter 2017 pre-tax profit is higher compared with 2016, more than explained by favorable volume and mix, ~~driven by~~reflecting growth in ~~all products, offset by the adverse effect of the stronger U.S. dollar~~consumer and ~~lower margin driven by lower portfolio yield.~~non-consumer finance receivables.

Unallocated ~~Risk Management~~Other

The improvement in ~~unallocated risk management for~~Unallocated Other in the ~~third~~first quarter ~~and first nine months~~ of 2017 compared with 2016 ~~primarily~~ reflects ~~higher net gains related to~~favorable performance in market valuation adjustments to derivatives. For additional information, see Notes 89 and 1314 of our Notes to the Financial Statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financing Shares and Contract Placement Volume

Our focus is on supporting Ford and Lincoln dealers and customers. This includes going to market with Ford and our dealers to support vehicle sales with financing products and marketing programs. Ford’s marketing programs may encourage or require Ford Credit financing and influence the financing choices customers make. As a result, our financing share, volume, and contract characteristics vary from quarter to quarter as Ford’s marketing programs change.

The following chart shows our ~~North America Segment’s~~United States and Canada retail installment and lease share of new Ford- and Lincoln-brand ~~vehicles sold by dealers~~vehicle retail sales and wholesale financing share of new Ford- and Lincoln-brand vehicles acquired by dealers. Also shown is ~~our North America Segment’s~~the America’s consumer financing contract placement volume for new and used vehicles. All data is for the periods ended ~~September 30:~~March 31:

Americas Segment first quarter 2017 share and total contract volume are largely unchanged compared with 2016.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The ~~decrease in total contract volume for the third quarter and first nine months of 2016 reflects lower~~following chart shows Europe’s retail installment and lease share of new Ford-brand vehicles sold and wholesale financing share of new Ford-brand vehicles acquired by dealers. Also shown is Europe’s consumer financing contract placement volume for new and used vehicles. All data is for the periods ended March 31:

Europe Segment financing shares are unchanged. The growth in ~~the United States.~~first quarter 2017 total contract volume compared with 2016 reflects higher industry sales.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The following chart shows ~~our International Segment’s~~Asia Pacific’s retail installment ~~and lease~~ share of new Ford-brand vehicles sold by dealers and wholesale financing share of new Ford-brand vehicles acquired by dealers. Also shown is ~~our International Segment’s~~Asia Pacific’s consumer financing contract placement volume for new and used vehicles. All data is for the periods ended ~~September 30:~~March 31:

~~Total~~The increase in Asia Pacific Segment first quarter 2017 total contract volume ~~in the third quarter and first nine months~~compared with 2016 was a result of ~~2016 increased from a year ago, primarily reflecting growth in China and Mexico.~~

~~Our operations in China achieved record contract volume in the third quarter, as more consumers are choosing to finance the purchase of vehicles.~~

higher retail installment financing share.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition

Finance Receivables and Operating Leases

Our receivables, including finance receivables and operating leases, were as follows:

__________

At March 31, 2016, December 31, ~~2014~~2016, ~~September 30, 2015, December~~and March 31, ~~2015, and September 30, 2016,~~2017, includes consumer receivables before allowance for credit losses of ~~$24.4~~$30.7 billion, ~~$27.7 billion, $27.6~~$32.5 billion, and ~~$29.9~~$33.4 billion, respectively, and non-consumer receivables before allowance for credit losses of ~~$21.8~~$26.8 billion, ~~$23.1 billion, $26.1~~$26.0 billion, and ~~$23.3~~$26.4 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. In addition, at March 31, 2016, December 31, ~~2014, September 30, 2015, December~~2016, and March 31, ~~2015, and September 30, 2016,~~2017, includes net investment in operating leases before allowance for credit losses of ~~$9.6 billion, $11.3 billion,~~ $13.3 billion, $11.8 billion, and ~~$10.0~~$12.3 billion, respectively, that have been included in securitization transactions but continue to be reported in our consolidated financial statements. The receivables and net investment in operating leases are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. For additional information on our securitization transactions, refer to the “Securitization Transactions” and “On-Balance Sheet Arrangements” sections of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report and Note 67 of our Notes to the Financial Statements for the period ended ~~September 30, 2016.~~March 31, 2017.


**	~~Dealer financing primarily includes wholesale loans to dealers to finance the purchase of vehicle inventory.~~

Receivables at ~~September 30, 2016~~March 31, 2017 increased from year-end ~~2015,~~2016, driven by growth in consumer and non-consumer finance receivables ~~and operating leases~~ globally.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Risk

Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms. Credit losses are a normal part of a ~~lending~~financing business, and credit risk has a significant impact on our business. We actively manage the credit risk of our consumer (retail financing and operating lease) and non-consumer (dealer financing) receivables to balance our level of risk and return using our consistent underwriting standards, effective proprietary scoring system (discussed below), and world-class servicing. The allowance for credit losses (also referred to as the credit loss reserve) represents our estimate of the probable credit losses inherent in our finance receivables and operating leases as of the balance sheet date. The allowance for credit losses is estimated using a combination of models and management judgment, and is based on such factors as historical loss performance, portfolio quality, and receivable levels. The adequacy of our allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. A description of our allowance setting process is provided in the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report.

Most of our charge-offs are related to retail finance and operating lease contracts. Charge-offs are affected by the number of vehicle repossessions, the unpaid balance outstanding at the time of repossession, the auction price of repossessed vehicles, and other charge-offs. We also incur credit losses on our dealer financing, but default rates for these receivables historically have been substantially lower than those for retail finance and operating lease contracts. For additional information on severity, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report.

In purchasing retail finance and operating lease contracts, we use a proprietary scoring system that measures credit quality using ~~several factors, such as~~information in the credit application, proposed contract terms, credit bureau data, and other information ~~consumer~~we obtain. After a proprietary risk score is generated, we decide whether to purchase a contract using a decision process based on a judgmental evaluation of the applicant, the credit ~~risk scores~~application, the proposed contract terms, credit bureau information (e.g., FICO score), ~~contract characteristics,~~proprietary risk score, and ~~customer characteristics, including employment~~other information. Our evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, applicant credit history, ~~financial~~and stability ~~and capacity to pay.~~as key considerations. While FICO is a part of our scoring system, our models enable us to more effectively determine the probability that a customer will pay than using credit scores alone. When we originate business, our models project expected losses and we price accordingly. We ensure the business fits our risk appetite. For additional information on the quality of our receivables, see Note 34 of our Notes to the Financial Statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

U.S. Origination Metrics

We support customers across the credit spectrum. Our higher risk business, as classified at contract inception, consistently represents 5%-6% of our portfolio and has been stable for over 10 years.

The following charts show quarterly trends for FICO and higher risk mix and retail contract terms:

~~The~~Our first quarter 2017 average placement FICO score remained ~~consistent with the second quarter of 2016 and the same period last year.~~consistent.

Our average retail term remains largely unchanged from last year, and retail contracts of 73 months and longer continued to be a relatively small part of our business. ~~We remain~~Ford Credit remains focused on managing the trade cycle – building customer relationships and loyalty while offering financing products and terms customers want.

~~Our~~Ford Credit’s origination and risk management processes deliver robust portfolio performance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

U.S. Credit Losses

The following charts show the primary drivers of credit losses in the U.S. retail and lease business, which comprised 73% of our worldwide consumer portfolio at ~~September 30, 2016.~~March 31, 2017. Loss-to-Receivables (“LTR”) ratios are charge-offs on an annualized basis divided by average managed receivables.

Credit losses have been at historically low levels for quite some time, and we continue to see credit losses increase toward more normal levels.

Delinquencies and the repossession ratio were up from ~~the same period~~ last year.

Severities have increased over the last number of ~~quarters.~~years. These increases include factors such as higher average amount financed, longer-term financing, shorter average time to repossession, lower auction values, and higher principal outstanding at repossession.

~~Lower auction values accounted for about half of the severity increase~~ Severity increased in the ~~third~~first quarter ~~from~~of 2017 compared to the prior year, ~~with the other half explained~~primarily driven by ~~the other factors.~~lower auction values.

Charge-offs and the LTR ratio were up year-over-year, primarily reflecting higher defaults and higher severities. The higher defaults reflect an increased default frequency as well as growth in receivables.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Worldwide Credit Losses

The following charts show quarterly trends of charge-offs (credit losses, net of recoveries), LTR ratios, credit loss reserve, and our credit loss reserve as a percentage of end-of-period (“EOP”) managed receivables:

Our worldwide credit loss metrics remain strong. The worldwide LTR ratio ~~for the third quarter of 2016~~ is higher than last year, primarily reflecting the U.S. retail and lease business as covered above.

Our credit loss reserve is based on such factors as historical loss performance, portfolio quality, and receivable levels.

The credit loss reserve was higher at ~~September 30, 2016,~~March 31, 2017, compared to ~~June 30,~~March 31, 2016, reflecting credit loss performance trends and growth in ~~retail~~ receivables.

The reserve as a percent of managed receivables was up from the ~~third~~first quarter of ~~2015.~~

2016.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Residual Risk

Leasing is an important product that many customers want and ~~value, and lease~~value. Lease customers also are more likely to buy or lease another Ford or Lincoln vehicle. WeFord and Ford Credit manage ~~our~~ lease share with an enterprise view to support sales, protect residual values, and manage the trade cycle. ~~Ford Credit and Ford work together under a One Ford lease~~Our leasing strategy ~~that~~ considers share, term, model mix, geography, and other factors.

We are exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to us. Residual risk is the possibility that the amount we obtain from returned vehicles will be less than our estimate of the expected residual value for the vehicle. We estimate the expected residual value by evaluating recent auction values, return volumes for our leased vehicles, ~~industrywide~~industry-wide used vehicle prices, marketing incentive plans, and vehicle quality data. ~~Changes~~For operating leases, changes in expected residual values impact the depreciation expense, which is recognized on a straight-line basis over the life of the lease.

For additional information on our residual risk on operating leases, refer to the “Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report.

U.S. Ford- and Lincoln-Brand Operating Lease Experience

The following charts show lease placement volume and lease share of Ford- and Lincoln-brand retail sales for vehicles in the respective periods. The U.S. operating lease portfolio accounted for about ~~88%~~91% of our total net investment in operating leases at ~~September 30, 2016.~~March 31, 2017.

Given significant industry growth in leasing and higher new vehicle incentives, we lowered our projection on residual values which makes the relative cost of leasing higher. As a result, lease share andOur first quarter 2017 lease placement volume ~~in the third quarter were~~was down compared to a year ago reflecting Ford’s lower lease mix. Industry lease share is largely unchanged compared to a year ago. ~~We continue to expect full-year~~Ford Credit’s first quarter 2017 lease share was down compared to ~~be lower than~~ the ~~first quarter of 2016,~~prior year and remains below the industry, reflecting the parameters of our ~~lease~~leasing strategy.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The following charts show lease return volumes, return rates, and off-lease auction values at constant ~~third~~first quarter ~~2016~~2017 vehicle mix ~~for vehicles returned~~ in the respective periods:

Lease return volume in the ~~third~~first quarter of ~~2016~~2017 was up from the prior year, reflecting higher lease placements in recent years and an increased return rate. ~~The higher mix of 36-month leases returning in 2016 reflects the shift toward longer term leasing made in 2013.~~

Our ~~off-lease~~used vehicle auction values in the ~~third~~first quarter of ~~2016~~2017 were lower than a year ago and ~~slightly lower~~seasonally higher than the prior ~~quarter, with 36-month off-lease~~quarter. Year over year, auction values ~~about $600~~are lower ~~year-over-year. Our auction performance has been~~across the portfolio, consistent with the ~~industry when comparing similar vehicle age and segment.~~industry.

Over the last several years, we have seen industry lease share grow with rising industry volumes. As a result, the supply of off-lease vehicles is higher and will continue to grow for the next several years. ~~The~~We expect the increased supply of used vehicles ~~along with higher new vehicle incentives, is resulting in lower auction values, particularly in smaller, more fuel efficient vehicles given low fuel prices. We expect this trend~~ to continue ~~and we are planning for lower~~to put downward pressure on auction ~~values going forward.~~values.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Ratings

Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the U.S. Securities and Exchange Commission:

DBRS Limited (“DBRS”);

Fitch, Inc. (“Fitch”);

Moody’s Investors Service, Inc. (“Moody’s”); and

Standard & Poor’s Ratings Services, a division of McGraw Hill Financial (“S&P”).

In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating agencies’ ratings of us are based on information provided by us and other sources. Credit ratings assigned to us from all of the NRSROs are closely associated with their opinions on Ford. Credit ratings are not recommendations to buy, sell, or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency.

There have been no rating actions taken by these NRSROs since the filing of our ~~Quarterly Report on~~2016 Form ~~10-Q for the quarter ended June 30, 2016.~~10-K Report.

The following chart summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:

NRSRO RATINGS

Ford Credit

NRSROs

Long-Term Senior Unsecured

Short -Term Unsecured

Outlook / Trend

Minimum Long-Term Investment Grade Rating

DBRS

BBB

R-2M

Stable

BBB (low)

Fitch

BBB

Stable

BBB-

Moody’s

Baa2

P-2

Stable

Baa3

S&P

BBB

A-2

Stable

BBB-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Funding and Liquidity

Our primary funding and liquidity objective is to ~~maintain~~be well capitalized with a strong investment grade balance sheet ~~with~~and ample liquidity to support our financing activities and growth under a variety of market conditions, including short-term and long-term market disruptions.

Our funding strategy remains focused on diversification, and we plan to continue accessing a variety of markets, channels, and investors.

Our liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet our business and funding requirements. We ~~regularly~~annually stress test our balance sheet and liquidity to ensure that we continue to meet our financial obligations through economic cycles.

Funding Portfolio

The following chart shows the trends in funding for our managed receivables:

Managed receivables of ~~$134~~$140 billion ~~at the end~~as of ~~the third quarter of 2016~~March 31, 2017, were funded primarily with term debt and term asset-backed securities. Securitized funding as a percent of managed receivables was ~~33%~~35%.

We expect the mix of securitized funding to trend lower over time. ~~The~~However, the calendarization of the funding plan may result in quarterly fluctuations of the securitized funding percentage. ~~We expect this mix to be higher in the fourth quarter.~~

In April 2017, FCE Bank plc (“FCE”) launched Ford Money retail deposits for U.K. consumers, providing additional funding diversity.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Public Term Funding Plan

The following chart shows our issuances for full-year ~~2014~~2015 and ~~2015,~~2016, planned issuances for full-year ~~2016,~~2017, and our global public term funding issuances through ~~October~~April 26, ~~2016,~~2017, excluding short-term funding programs:

For ~~2016, we now project~~2017, our full-year forecast is unchanged with public term funding in the range of ~~$26~~$24 billion to ~~$29~~$30 billion. Through ~~October~~April 26, ~~2016,~~2017, we have completed ~~$26~~over $11 billion of public term issuance.

In April 2017, Ford Automotive Finance (China)’s securitization issuance earned the first auto-ABS international rating agency AAA rating in the market.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity Sources

We define gross liquidity as cash, cash equivalents, and marketable securities (excluding amounts related to insurance activities) and committed capacity (which includes our credit and asset-backed facilities and bank lines), less utilization of liquidity. Utilization of liquidity is the amount funded under our liquidity sources and also includes the cash and cash equivalents required to support securitization transactions. Securitization cash is cash held for the benefit of the securitization investors (for example, a reserve fund). Net liquidity available for use is defined as gross liquidity less certain adjustments for asset-backed capacity in excess of eligible receivables and cash related to the Ford Credit Revolving Extended Variable-utilization program (”(“FordREV”), which can be accessed through future sales of receivables. While not included in available liquidity, these adjustments represent additional funding sources for future originations.

The following chart shows our liquidity sources and utilization:

Our liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth, and timing of funding transactions. We ~~have a~~ target liquidity of at least $25 billion. As of ~~September 30, 2016,~~March 31, 2017, liquidity available for use was up ~~$9.8~~$2.3 billion from year-end ~~2015 and down $500 million from second quarter~~ 2016.

As of ~~September 30, 2016,~~March 31, 2017, our liquidity remained strong at ~~$33.3~~$29.3 billion. Our sources of liquidity include cash, committed asset-backed facilities, unsecured credit facilities, and the Ford corporate credit facility allocation. As of ~~September 30, 2016~~March 31, 2017 our liquidity sources including cash totaled ~~$50.2~~$51.7 billion, up ~~$500~~$800 million from year-end.

Cash, Cash Equivalents, and Marketable Securities. At ~~September 30, 2016,~~March 31, 2017, our cash, cash equivalents, and marketable securities (excluding amounts related to insurance activities) totaled ~~$9.2~~$11.3 billion, compared with ~~$11.2~~$10.8 billion at year-end ~~2015.~~2016. In the normal course of our funding activities, we may generate more proceeds than are required for our immediate funding needs. These excess amounts held primarily in highly liquid investments, which provide liquidity for our anticipated and unanticipated cash needs and give us flexibility in the use of our other funding programs. Our cash, cash equivalents, and marketable securities (excluding amounts related to insurance activities) primarily include U.S. Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions, ~~and non-U.S. central banks,~~commercial paper rated A-1/P-1 ~~(or higher) rated commercial paper,~~or higher, debt obligations of a select group of non-U.S. governments, non-U.S. ~~government~~governmental agencies, supranational institutions, non-U.S. central banks, and money market funds that carry the highest possible ratings.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The average maturity of these investments ranges from ~~about 90 days~~approximately three to ~~up to about one year~~six months and is adjusted based on market conditions and liquidity needs. We monitor our cash levels and average maturity on a daily basis. Cash, cash equivalents, and marketable securities included amounts to be used only to support our securitization transactions of ~~$2.6~~$3.0 billion and ~~$4.3~~$3.4 billion at ~~September 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively.

Committed Capacity. At ~~September 30, 2016,~~March 31, 2017, our committed capacity totaled ~~$41.0~~$40.4 billion, up ~~$2.5 billion~~$300 million from December 31, ~~2015.~~2016. Our committed capacity is primarily comprised of committed ~~ABS~~asset-backed security (“ABS”) facilities from bank-sponsored commercial paper conduits and other financial institutions, unsecured credit facilities with financial institutions, and allocated commitments under the Ford corporate credit facility.

Committed Asset-Backed Facilities. We and our subsidiaries have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits and other financial institutions. Such counterparties are contractually committed, at our option, to purchase from us eligible retail receivables or to purchase or make advances under asset-backed securities backed by retail or wholesale finance receivables or operating leases for proceeds of up to ~~$35.6~~$34.8 billion ($~~19.2~~18.2 billion of retail financing, ~~$6.1~~$6.2 billion of wholesale financing, and ~~$10.3~~$10.4 billion of operating leases) at ~~September 30, 2016.~~March 31, 2017. These committed facilities have varying maturity dates, with ~~$18.0~~$21.2 billion having maturities within the next twelve months and the remaining balance having maturities through ~~2018.~~2019. We plan capacity renewals to protect our global funding needs, optimize capacity utilization, and maintain sufficient liquidity.

Our ability to obtain funding under these facilities is subject to having a sufficient amount of eligible assets as well as our ability to obtain interest rate hedging arrangements for certain facilities. At ~~September 30, 2016, $14.3~~March 31, 2017, $18.4 billion of these commitments were in use. These programs are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and generally, credit rating triggers that could limit our ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these programs to be terminated due to such events.

FCE has pre-positioned retail receivables with the Bank of England which supports access to the Discount Window Facility. Pre-positioned assets are neither pledged to nor held as collateral by the Bank of England unless the Discount Window Facility is accessed. FCE’s eligibility to access the Discount Window Facility is not reflected in the Liquidity Sources table above.

Unsecured Credit Facilities. At ~~September 30, 2016,~~March 31, 2017, we and our majority-owned subsidiaries had ~~$5.4~~$5.6 billion of contractually committed unsecured credit facilities with financial institutions, including the FCE Credit Agreement (as defined below) and the allocation under Ford’s corporate credit facility. At ~~September 30, 2016, $5.3~~March 31, 2017, $4.3 billion was available for use.

FCE’s £990 million (equivalent to ~~$1.3~~$1.2 billion at ~~September 30, 2016)~~March 31, 2017) syndicated credit facility (the “FCE Credit Agreement”) matures in 2019. At ~~September 30, 2016, £990~~March 31, 2017, £415 million (equivalent to ~~$1.3 billion)~~$518 million) was available for use. The FCE Credit Agreement contains certain covenants, including an obligation for FCE to maintain its ratio of regulatory capital to risk-weighted assets at no less than the applicable regulatory minimum, and for the support agreement between FCE and Ford Credit to remain in full force and effect (and enforced by FCE to ensure that its net worth is maintained at no less than $500 million). ~~In addition to customary payment, representation, bankruptcy, and judgment defaults, the FCE Credit Agreement contains cross-payment and cross-acceleration defaults with respect to other FCE debt.~~

Lenders under the Ford corporate credit facility have commitments totaling $13.4 billion, with 75% of the commitments maturing on April 30, 2021 and 25% of the commitments maturing on April 30, 2019. Ford has allocated $3.0 billion of commitments, including commitments under a Chinese renminbi sub-facility, to us on an irrevocable and exclusive basis to support our growth and liquidity. ~~During the third quarter of 2016, the Chinese renminbi sub-facility was utilized for the first time, with approximately $60 million drawn and repaid during the quarter.~~ At ~~September 30, 2016,~~March 31, 2017, all $3.0 billion was available for use.

Ford is in the process of amending its corporate credit facility, with the closing scheduled to occur on April 28, 2017. When complete, Ford expects to maintain total commitments of $13.4 billion, extend the respective maturity dates by one year, and maintain the $3.0 billion allocation to Ford Credit.

Funding and Liquidity Risks

Refer to the “Funding and Liquidity” section of Item 7 of Part II of our ~~2015~~2016 Form 10-K Report for a list of factors that could affect our liquidity and information on our stress testing.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Leverage

We use leverage, or the debt-to-equity ratio, to make various business decisions, including evaluating and establishing pricing for finance receivable and operating lease financing, and assessing our capital structure. We refer to our shareholder’s interest as equity.

The following chart shows the calculation of our financial statement leverage and managed leverage (in billions, except for ratios):

We plan our managed leverage by considering prevailing market conditions and the risk characteristics of our business. At ~~September 30, 2016,~~March 31, 2017, financial statement leverage was ~~9.7:~~9.8:1, and managed leverage was ~~9.2:~~9.1:1. We target managed leverage in the range of 8:1 to 9:1. Managed leverage ~~is above the targeted range reflecting growth in receivables and the continued impact of a strong U.S. dollar, but~~ continues to trend toward our target range. For information on our planned distributions, refer to the “Outlook” section.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Outlook

We continue to expect ~~our full-year 2016~~full year pre-tax profit to be about ~~$1.8 billion.~~

In$1.5 billion, which is lower compared with 2016 due to the ~~fourth quarter, we expect higher supplemental~~impact of increased accumulated depreciation indriven by expected lower residual values for our lease portfolio ~~reflecting expected lower auction values.~~in the Americas segment.

~~Additionally, FCE Bank expects a one-time charge of approximately $80 million related~~Distributions to ~~the settlement of a deficit~~our parent are resuming in ~~a Ford-sponsored retirement plan. The offset will be reflected in Ford of Europe’s results.~~2017 as managed leverage returns to target range.

We continue to expect 2018 pre-tax profits to improve.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Risk Factors

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

Decline in industry sales volume, particularly in the United States, Europe, or China, due to financial crisis, recession, geopolitical events, or other factors;

~~Decline in Ford’s market share or failure to achieve growth;~~

Lower-than-anticipated market acceptance of Ford’s new or existing products or ~~services;~~services, or failure to achieve expected growth;

Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning assumption, particularly in the United States;

~~An increase in or continued volatility of fuel prices, or reduced availability of fuel;~~

Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;

Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;

Adverse effects resulting from economic, geopolitical, protectionist trade policies, or other events;

Economic distress of suppliers that may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase costs, affect liquidity, or cause production constraints or disruptions;

Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or other financial distress, production constraints or difficulties, or other factors);

Single-source supply of components or materials;

Labor or other constraints on Ford’s ability to maintain competitive cost structure;

Substantial pension and other postretirement ~~health care and life insurance~~ liabilities impairing liquidity or financial condition;

Worse-than-assumed economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns);

Restriction on use of tax attributes from tax law “ownership change;”

The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty costs;

Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or sales restrictions;

Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;

A change in requirements under long term supply arrangements committing Ford to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller (“take-or-pay” contracts);

Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments;

~~Inherent limitations of internal controls impacting financial statements and safeguarding of assets;~~

Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a third-party vendor or supplier;

Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;

Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;

Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;

Increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing Ford vehicles; and

New or increased credit regulations, consumer or data protection regulations, or other regulations resulting in higher costs and/or additional financing restrictions.

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our ~~2015~~2016 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Accounting Standards Issued But Not Yet Adopted

The Financial Accounting Standards Board (“FASB”) has issued the following standards, which are not expected to have a material impact (with the exception of standards 2016-02 and 2016-13) to our financial statements or financial statement disclosures:



Standard		Effective Date (a)
~~2014-15~~2016-18	~~Going Concern~~Statement of Cash Flows - ~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern~~	~~December 31, 2016~~
~~2016-09~~	~~Stock Compensation - Improvements to Employee Share-Based Payment Accounting~~Restricted Cash	January 1, ~~2017~~
~~2016-07~~	~~Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting~~	~~January 1, 2017~~
~~2016-06~~	~~Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments~~	~~January 1, 2017~~
~~2016-05~~	~~Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships~~	~~January 1, 2017~~2018
2016-16	Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory	January 1, 2018
2016-15	Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments	January 1, 2018
~~2016-04~~	~~Extinguishments of Liabilities - Recognition of Breakage for Certain Prepaid Stored-Value Products~~	~~January 1, 2018~~
2016-01	Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities	January 1, 2018
~~2014-09~~2017-08	~~Revenue~~Nonrefundable Fees and Other Costs - ~~Revenue from Contracts with Customers~~Premium Amortization on Purchased Callable Debt Securities	January 1, ~~2018 (b) (c)~~2019
2016-02	Leases	January 1, 2019 (b)
2016-13	Credit Losses - Measurement of Credit Losses on Financial Instruments	January 1, 2020 (b)

__________


(a)	Early adoption for each of the standards, except standard 2016-01, is permitted.


(b)	For additional information, see Note 12 of our Notes to the Financial Statements.

~~(c)~~

The FASB has issued the following updates to the Revenue from Contracts with Customers standard: Accounting Standard Update (“ASU”) 2015-14 (Deferral of the Effective Date), ASU 2016-08 (Principal versus Agent Considerations (Reporting Revenue Gross versus Net)), ASU 2016-10 (Identifying Performance Obligations and Licensing), and ASU 2016-12 (Narrow-Scope Improvements and Practical Expedients). We plan to adopt the new revenue guidance effective January 1, 2017.

Other Financial Information

The interim financial information included in this Quarterly Report on Form 10-Q for the periods ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~ has not been audited by PricewaterhouseCoopers LLP (“PwC”). In reviewing such information, PwC has applied limited procedures in accordance with professional standards for reviews of interim financial information. Readers should restrict reliance on PwC’s reports on such information accordingly. PwC is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for its reports on interim financial information, because such reports do not constitute “reports” or “parts” of registration statements prepared or certified by PwC within the meaning of Sections 7 and 11 of the Securities Act of 1933.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

In our ~~2015~~2016 Form 10-K Report, we discuss in greater detail our market risk, counterparty risk, credit risk, residual risk, liquidity risk, and operating risk.

To provide a quantitative measure of the sensitivity of our pre-tax cash flow to changes in interest rates, we use interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a twelve-month period represent an estimate of the sensitivity of our pre-tax cash flow. Under this model, we estimate that at ~~September 30, 2016,~~March 31, 2017, all else constant, such an increase in interest rates would increase our pre-tax cash flow by $5$23 million over the next 12 months, compared with an increase of $7$21 million at December 31, ~~2015.~~2016. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in our analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. N. Joy Falotico, our Chairman of the Board and Chief Executive Officer (“CEO”), and Marion B. Harris, our Chief Financial Officer (“CFO”) and Treasurer, have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of ~~September 30, 2016~~March 31, 2017, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. There were no changes in internal control over financial reporting during the quarter ended ~~September 30, 2016~~March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

Ford Motor Credit Company v. Sudesh ~~Agrawal~~Agrawal.. On January 18, 2011, a state trial court judge in Cuyahoga County, Ohio certified a nationwide class action with an Ohio subclass in a counterclaim arising out of a collection action. Class claimants allege breach of contract, fraud, and statutory violations for Ford Credit’s lease-end wear and use charges. Class claimants allege that the standard applied by Ford Credit in determining the condition of vehicles at lease-end is different than the standard set forth in claimants’ leases. The Court of Appeals of Ohio, Eighth Appellate District, affirmed nationwide class certification and certification of an Ohio subclass. We appealed, and on December 17, 2013, the Supreme Court of Ohio reversed the Court of Appeals and remanded the case for further proceedings. On March 13, 2014, the Court of Appeals reversed the trial court order certifying the classes and remanded the case for further proceedings. On September 28, 2015, the trial court re-certified a nationwide class action with an Ohio subclass. We appealed, and on September 22, 2016, the Court of Appeals reversed the trial court order certifying the classes and remanded the case for further proceedings. On April 24, 2017, the claimant filed an appeal to the Supreme Court of Ohio. We plan to file a response.

ITEM 5. Other Information.

None.

ITEM 6. Exhibits.

Exhibits: please refer to the Exhibit Index on page ~~50.~~52.

Instruments defining the rights of holders of certain issues of long-term debt of Ford Credit have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford Credit. Ford Credit will furnish a copy of each such instrument to the SEC upon request.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Ford Motor Credit Company LLC has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

FORD MOTOR CREDIT COMPANY LLC



By:	/s/ Marion B. Harris
	Marion B. Harris
	Chief Financial Officer and Treasurer

Date:	~~October~~April 27, ~~2016~~2017

EXHIBIT INDEX



Designation	Description	Method of Filing

Exhibit 12	Calculation of Ratio of Earnings to Fixed Charges.	Filed with this Report.

Exhibit 15	Letter of PricewaterhouseCoopers LLP, dated ~~October~~April 27, ~~2016,~~2017, relating to financial information.	Filed with this Report.

Exhibit 31.1	Rule 15d-14(a) Certification of CEO.	Filed with this Report.

Exhibit 31.2	Rule 15d-14(a) Certification of CFO.	Filed with this Report.

Exhibit 32.1	Section 1350 Certification of CEO.	Furnished with this Report.

Exhibit 32.2	Section 1350 Certification of CFO.	Furnished with this Report.

Exhibit 99	Items 2 - 4 of Part I of Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2016.~~March 31, 2017.	Incorporated herein by reference to Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2016.~~March 31, 2017. File No. 1-3950.

Exhibit 101.INS	XBRL Instance Document.	*

Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document.	*

Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	*

Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	*

Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	*

Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	*

__________


*	Submitted electronically with this Report in accordance with the provisions of Regulation S-T.

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