Letter from Alan Mulally

Since our last report was published, the most immediate concern for many companies has been ensuring their economic sustainability amid the worst business environment in generations. By continuing to follow the ONE Ford plan we put in place three years ago, Ford Motor Company successfully weathered the economic storm. During 2009, our Company posted our first full year of positive net income since 2005. And we expect to be profitable in 2010. Our market share grew in North America, Europe and South America, while sales increased in the rapidly growing Asia Pacific and Africa region.

These results, which demonstrate that our business strategy is working, enable us to continue to invest in the development of a full range of vehicles with the best quality, fuel efficiency, safety, smart design and value. A balanced portfolio of best-in-class vehicles will, in turn, enable us to continue moving forward toward our goal of profitable growth.

In these challenging times, we remain completely focused on the four points of our ONE Ford plan – aggressively restructure the business, accelerate development of vehicles people want and need, finance our plan and improve our balance sheet, and work together as one team worldwide leveraging our global assets.

By following our plan, we are building great products, a strong business and a better world.

Continuing Commitment

Along with improvements in our operating results, we continue to make significant progress on a number of the sustainability issues we have identified as top priorities, including improved fuel economy and reduced vehicle greenhouse gas emissions.

In 2007 we launched our "blueprint for sustainability" plan, a series of near-, mid- and long-term product actions that address climate change and energy security and affordability issues. The goal of this plan is to reduce the carbon dioxide (CO₂) emissions of our U.S. and European vehicles by 30 percent by 2020 relative to the 2006 model year. The plan also commits us to being the best or among the best in fuel economy for every vehicle segment in which we compete.

I am happy to report that we are on track to meet or exceed these goals. We are providing affordable fuel economy for millions of customers by introducing fuel-saving technologies across a wide range of vehicles.

According to a report published by the U.S. Environmental Protection Agency (EPA) in November 2009, our overall fuel economy has improved more than any other major automaker since 2004. The EPA rated Ford's combined car and truck fuel economy improvement in the United States at nearly 20 percent, almost double the next-closest competitor.

To help bring advanced fuel-saving technologies to market quickly and affordably, we created a single global product development organization in 2007. This allows us to fully leverage our resources and maximize economies of scale so that we can provide affordable fuel economy for millions of customers across a wide range of vehicles. Along with investments in flexible manufacturing and technologies that help us bring vehicles to market faster, this organization helps us adapt quickly and effectively to changes in consumer preferences and regulatory environments. It also allows us to tailor global vehicles to local needs and wants.

Our approach is not to pursue every possible solution. Our roadmap allows us to reduce emissions and fossil fuel use in the near term while ensuring we are ready with new technologies as they mature in the mid- and long-term.

As part of our commitment to protecting human rights and implementing the principles of the United Nations Global Compact, we continue to work in our operations and with business partners, other automakers and governments to promote a common approach to protecting human rights in our plants and supply chain. Our leadership was recently recognized when Corporate Responsibility Officer magazine ranked Ford's human rights efforts first among companies on its "100 Best Corporate Citizens" list.

Other priorities we are addressing include vehicle safety and corporate governance. The details of our accomplishments and challenges in these and other high-priority areas can be found in this report.

Emerging Issues and Opportunities

As a global community, we have the opportunity to forge a compelling vision and to contribute collectively to addressing the issues Bill Ford identified in his letter for this report: economic growth, energy independence and environmental sustainability.

Issues of this magnitude require working together on a grand scale. I see two key enablers of progress in these areas: technologies and innovation will provide the solutions, while collaborative partnerships and a systems approach will help us implement them.

For example, over the next three years, we will introduce five new vehicles that are the focal point of our aggressive plan to bring pure battery electric, next-generation hybrid and plug-in hybrid vehicles to market more quickly and affordably. These vehicles will use advanced lithium-ion battery technology.

Vehicle electrification relies on deploying new infrastructure while linking existing elements into smart systems facilitated by information and communication technologies. This calls for unprecedented collaboration and joint action by automakers, utility companies, governments and transportation organizations. Ford has been working with a dozen utility companies and several U.S. cities to explore key issues and solutions to electrification and mobility challenges.

In another collaboration, we recently announced that we will implement the Microsoft Hohm™ energy management application for Ford electric vehicles. Hohm will help owners determine when and how to most efficiently and affordably recharge battery electric vehicles and plug-in hybrid vehicles. It also should help utility companies manage the added demands of electric vehicles on the electric grid to reap the greatest efficiency and CO₂ reduction. This collaboration builds on our successful partnership to develop the award-winning SYNC® technology now found in 2 million Ford automobiles. SYNC is one of the Ford innovations that recently prompted Fast Company magazine to call Ford "America's most surprising consumer-electronics company."

These efforts show that our leadership in connected cars is more than a clever way to deliver entertainment and communication to our customers – it provides the vital platform for future innovation in electrification and sustainable mobility.

We are working collaboratively on other issues as well. For example, Ford Motor Company is taking a leadership position in joining the Carbon Disclosure Project's (CDP) Water Disclosure program, which will establish a water disclosure protocol for companies around the world and promote conservation and stewardship. We are also learning more about carbon emissions in our supply chain by participating in the CDP's Supply Chain Initiative and by road testing the World Resources Institute/World Business Council on Sustainable Development's Scope 3 reporting protocol. Ford is the only automaker participating in these initiatives.

Looking Ahead

We believe that great companies are driven by purpose as well as profit. Our intense focus on improving our cost structure, strengthening our balance sheet and delivering great products will continue going forward. So will our efforts to be a good neighbor locally and a trusted corporate citizen globally.

Ford has a proud heritage of improving people's lives and making their world a better place. We want to build on this heritage by being recognized as a trusted partner and operating responsibly and sustainably wherever we do business. Our Company has been through some tough times, but we have learned from these challenges. We have emerged leaner, stronger and more focused. We know there are more – and probably different – challenges ahead. We also know that the successful companies of the 21st century will be those that understand global sustainability issues and offer viable solutions. Through a decade of work and a disciplined reinvention of our Company, we have built sustainability into our business model.

With the support of our stakeholders we are creating an exciting and viable company with profitable growth for all.

Alan R. Mulally
President and Chief Executive Officer
June 2010