Employees

Our employees are our most valuable resource. They are also the group of stakeholders who are most immediately affected by our restructuring. During 2008, we continued to take painful but necessary steps to reduce our salaried and hourly workforce, as part of our multi-year effort to return our North American operations to profitability.

Over the last three years, we have reduced employment levels in our Ford North America business unit by about 60,500. As of December 31, 2008, our Ford North America business unit had approximately 22,400 salaried employees and 52,800 hourly employees (including 3,200 at our Automotive Components Holdings facilities), compared with approximately 35,600 salaried employees and 100,100 hourly employees (including 13,900 at our ACH facilities) on December 31, 2005. Most of our hourly worker reductions were the result of early retirement offers and voluntary separation packages to U.S. employees, including Ford employees at our ACH plants.

During the third quarter of 2008, we reduced our salary-related costs by about 15 percent, which included the involuntary layoff of some salaried employees. We reduced our salaried workforce by 10 percent during the first quarter of 2009.

Since 2005, we have closed 12 manufacturing facilities in North America (including ACH facilities), and we have announced that four additional plant closures will take effect between 2009 and 2011. Two of these planned facility closures involve ACH facilities, with one ACH plant closing in 2009 and another in 2011. We are exploring our options for the four remaining ACH plants and intend to transition these businesses to the supply base as soon as practicable.

Ford fully complies with the federal Worker Adjustment and Retraining Notification Act (WARN), which requires companies to provide 60-day notifications of plant closures to employees.

See the Economy section of this report for more information on the plant closures and separation agreements.

We have entered into collective bargaining agreements with the UAW1 and the National Automobile, Aerospace, Transportation and General Workers Union (CAW) of Canada. Our agreements with the UAW and CAW provide for guaranteed wage and benefit levels throughout the term of the respective agreements, and provide for significant employment security, subject to certain conditions. As a practical matter, these agreements may restrict our ability to close plants and divest businesses during the terms of the agreements. Our agreement with the UAW expires on September 14, 2011.

In early 2009, we negotiated a mid-contract agreement with the UAW that will be critical to our efforts to operate through difficult financial times. We estimate that modifications to the contract will save us $500 million a year through a variety of mechanisms, including restructuring the financing of the Voluntary Employee Beneficiary Association, or VEBA, an independent trust designed to ensure health care coverage for current and future employees. (See the Sustaining Ford and Economy sections of this report for more detail.)

In 2008, we negotiated new Ford collective bargaining agreements with labor unions in Argentina, Brazil, France, Mexico, New Zealand, Romania, Russia, Taiwan and Thailand. We also negotiated a collective bargaining agreement at our Volvo (U.S.) affiliate. We began negotiations with labor unions in the UK and Germany in the fourth quarter of 2008; these were expected to be completed in 2009.

In 2009, we are or will be negotiating new collective bargaining agreements with labor unions in Australia, Belgium, Brazil, France, Mexico, New Zealand, Russia, Spain, Taiwan and Thailand.

We have taken further steps to reduce costs among salaried personnel, including: eliminating 2009 merit increases and bonuses; suspending 401(k) matches, tuition assistance and dependent scholarships; capping retiree life insurance at $25,000; and increasing employee cost-sharing in benefit programs.

In January 2008, we announced "One Ford," which aligns our efforts toward a common definition of success. One Ford provides consistent goals and expectations for employees, whether they work in Michigan or Shanghai, with a clear focus on the skills and behaviors we must demonstrate to accomplish One Team, One Plan, One Goal. All members of our global team are held accountable for incorporating One Ford into their daily work.

One Ford is designed to help every employee achieve his or her fullest potential as we work together to move the business forward. Over the last year, we have incorporated One Ford into our people processes, beginning with employee development. We have revamped our employee leadership and professional development programs to align with One Ford, providing employees with Web-based and classroom training to foster functional and technical excellence, encourage teamwork, promote Ford values and enhance our ability to deliver results. Our performance management processes ensure that employee objectives and behaviors align with One Ford. In the current economic environment, it is more important than ever to invest in our employees, strengthen their leadership skills and recognize them for delivering results that cultivate success.

Our efforts have also focused on supporting our employees following restructuring. We created a tool kit to help supervisors and employees adjust after their colleagues have been let go. Many employees go through what can be described as "survivor's syndrome" in the wake of personnel reductions. These employees, who might feel at once guilty and thankful to still have a job, wrestle with the frustrations of losing friends and colleagues. They also often must adjust to new job descriptions and workloads.

At Ford, we recognize the emotional toll that restructuring takes on an organization and on the people who remain. We believe that we must continue to look at our employees as our greatest asset and to develop programs that make their health and well-being a top priority.

As we move forward, we want our employees to feel fulfilled, to be engaged in our Company's recovery and, above all, to have confidence in Ford's future. We are working hard to help our employees understand their roles and where they fit in our organization and to see how their efforts will enable us to reach our goals as a Company.