Climate Change Risks and Opportunities

Regulations

As a global automobile manufacturing company, regulations related to GHGs affect many areas of our business, including our manufacturing facilities and the emissions from our vehicles.

The GHG regulatory landscape is changing rapidly:

• In the United States, CO2 emissions from vehicles have been regulated through Corporate Average Fuel Economy (CAFE)1 requirements for more than 30 years. Unlike some of our competitors, Ford has complied with CAFE standards throughout the life of the program. New light truck CAFE standards were recently promulgated, and they are set to increase each year from 2005 through 2011. These will pose a significant challenge for companies like Ford that produce light trucks. California and several other states have adopted regulations limiting GHG emissions from motor vehicles, a move that both the automobile industry and the federal government believe is preempted by the federal CAFE law. The litigation over these regulations is discussed in more detail here.

• In Europe, GHG emissions from manufacturing facilities are regulated through a combination of emission limits and market-based mechanisms. The EU Emission Trading Scheme regulations apply to 15 Ford Motor Company (including Premier Automotive Group) facilities in the UK, Belgium, Sweden, Spain and Germany. Ford anticipated the start of the EU Emission Trading Scheme and established internal business plans and objectives to maintain compliance with the new regulatory requirements. The EU has taken steps to propose stringent regulation of CO2 emissions from vehicles, following the 2008 end of a voluntary reduction commitment by the European auto industry. The proposed regulation is planned to be effective from 2012.

• The Chinese government has introduced weight-based fuel consumption standards for passenger cars and trucks. The standards began with 2005 model year (MY) passenger vehicles and increase in stringency for 2008 MY vehicles. Proposed standards for commercial trucks start in 2008. All of Ford's product offerings comply with the appropriate 2005 MY standards and are fully expected to comply with the 2008 MY standards as well.

• Other countries in the Asia Pacific region have introduced stringent fuel economy requirements, including Japan (2010) and Korea (2006/2009).

We have established global roles, responsibilities, policies and procedures to help ensure compliance with emissions requirements and participate in trading initiatives worldwide.

The regulation of vehicle fuel economy and GHG emissions has a significant impact on our current and future product offerings. We expect regulation to increase in the future, and it is in the interest of our Company and society to reduce the uncertainty and increase the predictability of policy frameworks and market conditions around the issue of climate change. We are committed to being a constructive participant in the formulation of policies to reduce GHG emissions across the entire economy and promote energy security.