Tracking Changing Customer Needs

Consumers' wants and needs are constantly evolving, and we must keep pace with them if we expect to remain competitive, particularly in a difficult economy. Ford monitors global market trends, shifting consumer interests, and social and political developments to identify issues that will likely affect our consumers, our industry and our Company. We rely on a network of internal and external experts – from around the world – to ensure that we get a diverse, comprehensive perspective on consumer trends and how they will affect consumers' future choices about vehicles and mobility. We apply these trend analyses throughout our marketing, product development, research and design organizations to guide future product and technology developments.

Our marketing experts use an intensive research and analysis process to understand who our potential customers are, what they value and what they want in a vehicle. We define a "brand DNA" and hypothetical "target customer" for each of our main brands. Ultimately, each individual product is also assigned its own specific DNA and target customer. The brand DNA and target customer profiles go beyond simple demographic information such as age, gender and income; we build complete profiles of our hypothetical target customers, including what they like to do, what music they listen to and where they shop. This approach helps us pinpoint our aims for each vehicle we produce. Of course, we are keenly aware that economic pressures will push the boundaries of brand loyalties, forcing us to work even harder to define our potential customers and build vehicles that they can afford.

The remainder of this section discusses four key trends we are currently tracking and responding to. First, we are introducing more fuel-efficient vehicles and rebalancing our portfolio to include more small and midsize cars in response to increased demands for greater fuel efficiency.

Also, we are responding to:

• Growing consumer interest in "ethical consumption," or a desire to buy products from companies that reflect one's own environmental and social values
• An increasing focus on value by consumers, particularly as global economic conditions worsen
• Expanding interest in the latest "smart communications" and convenience technologies that help consumers make the most of their time

Demand for Fuel Efficiency

Rising fuel prices, energy security issues and global climate change have spurred consumer interest in cleaner, more efficient vehicles. In the 2008 New Vehicle Customer Survey, fuel economy was chosen as the feature most influencing drivers' next vehicle purchase decision; it even ranked higher than pricing incentives and advanced safety technologies. Eighty-one percent of respondents (up from 75 percent in 2007) ranked fuel economy as extremely or very influential in their next vehicle purchase decision. As evidence of this, the more fuel-efficient crossover segment has seen significant growth compared to traditional truck-based SUVs. This shift in demand is visible in the changes in sales by vehicle segment since 2005.

Responding to this increasing demand is at the heart of our financial recovery plan and our product development plans. We recently announced that all of our new vehicles will be best in class or among the leaders in their segment for fuel economy. And we are continuing to design and introduce advanced technologies that improve fuel efficiency, reduce emissions and lessen dependence on foreign oil. Elsewhere in this report we describe our response to the increasing demand for fuel economy and our plans to improve fuel economy with advanced technologies.

Ethical Consumption

Customers are increasingly interested in buying products from brands and companies that reflect their environmental and social values – a trend we call ethical consumption. Ethical consumers want to feel good about their purchases and the companies with which they do business, and they are integrating ethical, religious, political, environmental and other beliefs in the purchasing decisions they make.

The values of companies and brands are becoming critical factors, too, driven in part by the fact that many social and environmental issues – like climate change – have worked their way into mainstream consumer consciousness. As a result, corporations are being held to a rising standard, shaped by the recognition that seemingly small actions can have personal and environmental health and wellness impacts. Increased access to information and corporate transparency are also driving purchases based on ethical issues.

While people are generally not willing to compromise on performance or affordability, they want products that come from ethical companies and have positive environmental and social impacts. Being a good corporate citizen, and making positive impacts on our stakeholders, communities and the planet as a whole, have been integral parts of Ford's century-long heritage. This report is one of the channels we use to share our story about our commitment to sustainability.

Focus on Value

In difficult economic times, consumers become increasingly interested in vehicles that cost less without sacrificing style, safety or quality. Also, buyers will hold on to their older vehicles for longer periods of time, increasing the importance of long-term durability.

We are responding to the global financial crisis and the resulting changes in consumer demand in many ways. For example, we are developing more fuel-efficient vehicles that will reduce overall operating costs by lowering lifetime fuel costs. We are introducing high-end technological innovations like the SYNC® entertainment and communication system in many of our vehicles. And, as always, we are increasing quality and long-term durability.

In addition, in March 2009 we announced the Ford Advantage Plan. This Plan provides customers with car payment support for up to 12 months on any new Ford, Lincoln or Mercury vehicle if they lose their job, as well as zero-percent, limited-term annual percentage rate financing on select vehicles. This is another way we are responding to customers' demand for value and security in economic hard times.

The Value of Time

As our lives become busier, time becomes the ultimate luxury. People who drive to work spend, on average, more than an hour every day in their cars – and they want to be able to use that time productively. As information and communication technologies advance, people expect to be able to communicate wherever they are – including in their vehicles. Indeed, consumers today want to be able to connect with the outside world from within their vehicles, and they want access to the information they need to get things done during their drives. Ford is responding to these demands by developing and implementing a wide range of cutting-edge, "drive smart" technologies that increase in-vehicle connectivity, productivity and efficiency, in an effort to make our customers' lives easier.