We will achieve this by:

• Focusing on customer satisfaction and loyalty, and keeping our promises
• Anticipating and meeting changing customer needs
• Delivering innovative products and services that offer high value in terms of function, price, quality, safety and environmental performance

Progress Since Our Last Report

Over the past year, our markets have continued to change. Consumers have shown an increasing interest in more fuel-efficient vehicles, though they do not want to compromise on performance, style or affordability. Demand for vehicles in developing countries has continued to grow and is outpacing demand growth in our developed markets in the United States and Europe. Also, we have experienced significant financial difficulties and have engaged in a major restructuring of our product- and customer-related activities.

Throughout all of these changes, we have continued to deliver new and improved products. In North America, we introduced the popular Ford Fusion, Mercury Milan and Lincoln MKZ sedans and the Ford Edge and Lincoln MKX crossover vehicles, which offer much of the functionality of traditional SUVs with significantly improved fuel economy.

In Europe, Ford's overall sales increased by 5 percent compared to 2005. The Ford S-MAX won Europe's Car of the Year, and the Ford Transit won International Van of the Year for 2007. Ford also maintained the best-selling car nameplate in Britain for the 30th consecutive year, and the Ford Transit remained the best-selling medium commercial vehicle in Europe. Please see the Global Product Guide for an overview of our products in all of our global markets.

We continued to grow in developing markets. In Russia, sales of Ford-brand vehicles increased approximately 92 percent in 2006. Ford remained the best-selling brand in Turkey. Our sales in the Asia Pacific region were up by 9 percent, with the majority of growth occurring in China and India. In China, we introduced more than 50 new dealers to meet growing consumer demand. Sales in South America were up 14 percent in 2006. As we continue to increase our presence in developing countries, we are also investigating strategies to deliver a new approach to sustainable mobility to a wider range of developing market consumers.

We are also developing and offering more sustainable products. In North America, Ford continued to offer the Ford Escape Hybrid and the Mercury Mariner Hybrid and expanded access to Flexifuel vehicles and renewable fuels. Ford produced almost 250,000 Flexifuel vehicles in 2006 alone and joined with VeraSun to expand renewable fuel availability in the Midwest. We also continued our efforts to develop next-generation hybrids and hydrogen vehicles.

Ford of Europe last year announced an investment of £1 billion to develop and implement fuel efficiency and emissions-reduction technologies. Ford of Europe also implemented new sustainable product metrics focused on improving the lifecycle environmental impacts of our vehicles. As a result, Ford of Europe received third-party certification of its lifecycle impact improvements. The Ford S-MAX and Galaxy vehicles also received an allergy-free air quality certification.

The quality of our vehicles has improved steadily, with some strong gains in 2006, including the following:

• In the United States:
  • In the first quarter of 2007, initial quality, which measures our customers' impressions of their vehicles at three months in service, were equal to or better than our primary competitors.
  • Six of our vehicles ranked as segment leaders for top quality: the Ford Fusion and Mercury Milan in midsize cars; the Ford Mustang and Shelby GT500 in sports cars; the Ford Expedition EL in large traditional SUVs; and the Lincoln Navigator in large premium utilities.
  • "Things gone wrong" improved by 33 percent between 2001 and 2006, and by 15 percent in 2006 alone.
  • Warranty spending per vehicle decreased by 27 percent compared to vehicles produced in 2005.
• Ford of Europe:
  • "Things gone wrong" improved by 20 percent from 2001 to 2006, and improved by 14 percent in 2006 alone.
  • Warranty spending decreased by 27 percent, and there were no safety recalls in 2006.
• Ford Asia Pacific:
  • "Things gone wrong" improved by 14 percent.
  • Warranty cost per unit decreased by 41 percent.
• Ford South America:
  • "Things gone wrong" improved by 15 percent.
  • Warranty cost per unit decreased by 19 percent.

Finally, we continue to work hard to understand and anticipate the products and services that customers want, including customers' demand for more sustainable vehicles. We have focused on developing a clear identity for each of our brands based on extensive market research and target customer definitions.