Serving Mature Markets

In order to be profitable, we must continue to meet the needs of our customers in mature markets, including North America and Europe.

In North America, we are delivering high-quality products to meet the needs of our customers. We are introducing highly desirable vehicles in the fastest-growing segments, including crossovers and more fuel-efficient vehicles. In 2007, crossover vehicles were the fastest-growing segment in the United States, growing by 17 percent overall. Sales of our crossovers – the Ford Edge, Lincoln MKX, Ford Taurus X, Ford Escape, Ford Escape Hybrid, Mercury Mariner and Mercury Mariner Hybrid – increased by 62 percent for the year. In its first full year on sale, the Ford Edge sold 130,125 units in the U.S. In addition, the Ford Escape Hybrid and the Mercury Mariner Hybrid both set sales records in 2007. These two vehicles remain the most fuel-efficient crossover SUVs on the market.

We have recently announced plans to introduce EcoBoost, an affordable engine technology that will deliver 10 to 20 percent better fuel economy and up to 15 percent fewer CO2 emissions. This technology will debut on the Lincoln MKS and the Ford Flex, both in 2009, and soon thereafter on other vehicles. EcoBoost volumes will reach more than 500,000 units annually in North America over the next five years and more than 750,000 units globally.

We are also planning to introduce new smaller and more fuel-efficient vehicles in North America. For example, we introduced a redesigned Ford Focus in 2007. The 2008 model year Focus fuel economy label improved to 24 (city)/33 (hwy) for the automatic transmission and 24 (city)/35 (hwy) for the manual, up from 23 (city)/31 (hwy) and 24 (city)/33 (hwy), respectively. In addition, we added great new styling and features, including ambient lighting and our new SYNC™ hands-free communications and entertainment technology.

Also in North America, Lincoln brand sales increased by 9 percent in 2007 – the largest gain of any luxury brand in the U.S. market. This growth was led by the Lincoln MKX crossover and Lincoln MKZ sedan, along with solid sales contributions from the Lincoln Navigator. Lincoln's all-new flagship sedan, the MKS, goes on sale in the summer of 2008. Less than a year after launch, it will be the first vehicle available with the EcoBoost engine.

By the end of 2008, we will have introduced new or significantly upgraded models of 70 percent of the Ford, Lincoln and Mercury products (by volume) sold in North America. By the end of 2010, 100 percent will be new or significantly upgraded. This means we will be launching a new vehicle approximately every two months, compared to our previous rate of introducing a new model every six months over the past two years.

Ford of Europe's sales increased by 93,500 units in 2007 to 1,833,600, a rise of more than 5 percent compared to 2006. In fact, we now hold a 9 percent share of the European market. These results were led by the Ford Focus and Ford Fiesta, which sold 496,600 and 378,220 units respectively. With additional new models being launched in 2008, we are optimistic that we will maintain our sales momentum in Europe.