Balancing Our Portfolio Profitably

To meet the demand for more fuel-efficient vehicles and increase our financial health, we are balancing the portfolio of vehicles we sell to better represent consumer demand for a variety of vehicle sizes and capabilities. We are leveraging our global product strengths to deliver six new world-class small and medium-sized vehicles to the United States over the next four years. And, we are targeting sales leadership in "people movers" and crossovers by adding new vehicles (such as the Ford Flex) and redefining existing vehicles (such as the Ford Explorer). Through these actions, we have aligned our product mix more closely with the broader industry. From 2005 to 2009, we reduced trucks from 44 percent to 35 percent of our product mix. In addition, we increased sport utility and crossover vehicles from 24 percent to 28 percent of our product mix; within this category we increased the percentage of crossover vehicles and decreased the percentage of SUVs. Also from 2005 to 2009, we increased the percentage of cars in our product mix from 32 percent to 37 percent. To continue our progress toward a more balanced portfolio, we are increasing our investment allocation in cars and crossovers from 59 percent to 82 percent of our total investment.

Although we believe that the shift to smaller, more fuel-efficient vehicles is permanent, trucks, vans and SUVs will continue to be an important part of our North American offerings, in order to meet our customers' needs. We intend to maintain our leadership position in these segments by focusing our investment on fuel-efficient vehicles, such as the new Ford Transit Connect, as well as all-new powertrains with advanced technology.

As consumer demand for smaller vehicles continues to increase, we need to provide the vehicles people want, and provide them profitably, in order to remain a sustainable business. As part of our financial stabilization plan, we are reversing our decades-long trend of losing money on the production of small cars in the United States. To accomplish this, and to secure our ability to continue to produce all types of vehicles in the United States, we are taking the following actions:

• Leveraging high volume of our global Focus-sized ("C-sized") platform vehicles, such that we will produce more than 2 million units per year by 2012
• Increasing the volume of Ford Focus cars to more than 1 million units per year by 2012
• Improving revenues on smaller vehicles by offering exciting exterior and interior designs, with class-leading fuel economy, safety performance, craftsmanship and technology. The improvements across all Ford vehicles are improving customers' perceptions of the Ford brand
• Improving costs on smaller vehicles to competitive levels through reduced complexity and global purchasing scale
• Improving fixed costs through more efficient utilization of manufacturing and supply base capacity and the sharing of engineering and tooling costs globally

The new Ford Fiesta and all-new Ford Focus platforms are good examples of how we are increasing small-car profitability without compromising on quality, safety, style or features. The Fiesta, which went on sale in Europe in 2008 and will be available globally in 2010, is the first major product to come out of our new global product development process. Leveraging and integrating our global operations is one key element in making small cars more profitably. The Focus platform will form the basis for 10 new compact models by 2012. We plan to introduce at least six of the new models in the United States, where we are converting truck assembly plants in Wayne, Michigan, and Louisville, Kentucky, to build small cars. The global Focus will go on sale in the United States in 2011 along with a battery electric version, called the Focus Electric. In addition, the Grand C-MAX – a seven-passenger, multi-activity vehicle that is based on the Focus platform – will come to the United States in 2011. The Grand C-MAX will use a four-cylinder, 1.6-liter EcoBoost engine.