Increasing Global Integration

Our core business strategy focuses on developing truly global vehicles that share common platforms, design elements, technologies and materials across our global markets. This approach is key to delivering high-quality, innovative and desirable products quickly and cost effectively. To make this strategy a reality, we have globally integrated our product development, manufacturing, purchasing and marketing efforts.

Going forward, we will be delivering more vehicles worldwide from fewer platforms. We have already reduced the number of global vehicle nameplates from 97 in 2006 to 59 in 2008 and then to 38 in 2010. Eventually, we will improve to 25 to 30 models globally, although we have not set a specific timetable to do that. In 2007, we had 27 different vehicle platforms, with 29 percent of our total production volume produced from core platforms. By 2014, we will have reduced our platforms to 13. By then, more than 80 percent of our volume globally will be produced off of core platforms, up from about 50 percent in 2009.

We have fully implemented our ONE Ford global product development system to deliver global platforms and customer-focused programs rapidly and efficiently across multiple markets. We use a hub-and-spoke approach, in which one lead product development engineering center – the hub – is assigned for each global vehicle line, thereby ensuring global scale and efficiency through common designs, parts, suppliers and manufacturing processes. The hubs are supported by regional engineering centers – spokes – which help deliver products tuned to local-market customer preferences while maintaining global design DNA.

With our ONE Ford plan, we are working to make all small- and medium-sized Ford vehicles on common platforms by 2013. This will include Fiesta- and Focus-sized small cars and utilities, Fusion- and Mondeo-sized midsize cars and utilities, compact pickups and commercial vans. In 2012, for example, we expect to produce more than 2 million vehicles from our global “C-car” (Focus-sized) platform. In North America alone, we expect to increase production of C-platform vehicles from 200,000 to 850,000 annually. We have already delivered on our promise to introduce at least 10 high-quality, fuel-efficient vehicles on this platform; they include the Focus sedan, hatchback, wagon and ST versions; the Focus Electric; the C-MAX five-passenger and seven-passenger versions; the C-MAX Energi Plug-In Hybrid; the C-MAX Hybrid; and a next-generation global utility vehicle to replace the Ford Kuga and Ford Escape. (The latter will be based on the Vertak concept vehicle revealed at the North American International Auto Show). By 2015, our global “B-car” (Fiesta-sized) platform will underpin 2 million vehicles. In 2010, we also unveiled our new global Ranger compact pickup truck. This new vehicle is based on our global small truck platform and will be sold in more than 180 markets. Leveraging global product programs has helped increase our overall product development efficiency by a projected 66 percent between 2006 and 2012.

We have also made changes to our Global Marketing organization to create a more consistent and compelling connection with customers worldwide, while better leveraging the Company’s global assets and capabilities. In 2010, we named Jim Farley, formerly Ford group vice president, Global Marketing and Canada, Mexico and South America operations, as Ford’s global leader for marketing, sales and service around the world. This marks the first time Ford has had a single global leader for marketing, sales and service. We are also taking many of our core marketing processes global. In 2010, for example, we expanded our Brand Equity and Awareness Tracking system to cover 45 global markets, up from 25 last year. This system, which tracks consumer familiarity and favorable opinion of our brands, as well as consideration, shopping and purchase intention, allows us to assess key elements of how consumers perceive our brand across our global markets. We are also implementing digitally based virtual market research technology throughout our global markets. This technology will allow us to test vehicle concepts in markets across the globe without shipping physical prototypes from one market to another. These global market research processes will help us develop truly global vehicles that appeal to consumers across national and regional borders.

These efforts to increase the global integration of our operations follow key restructuring efforts undertaken in 2007 and 2008. At that time, we reorganized senior leaders in the product development and purchasing organizations to assign global responsibility for key vehicle segments and major purchasing functions. We also globally integrated our regional research and product development organizations.

We are also increasing the global integration of our Quality Operating System. In 2008, for example, we completed the global implementation of a standardized quality system that replaced former regional systems. By requiring standardized processes and implementation everywhere we operate, we can continue to expand our world-class quality. Through our global product strategy and a single global management team, we are leveraging our assets, implementing best practices and a systematic approach to quality, and utilizing common components for the advantage of scale. The new integrated approach can be seen in the new Fiesta, our first of this generation of global cars under our ONE Ford plan. Selling one high-volume version of this vehicle helps us reduce defects and improve overall craftsmanship. In North America, Europe and Asia, we will launch our all-new C-cars in 2011 that will compare very favorably to competitive models with respect to attributes such as wind noise, steering feel, ride and handling, braking response, door closing sensation, performance feel and seat comfort.

We are also continuing the global implementation of EcoBoost™, our new fuel-efficient engine technology. This technology launched in the U.S. in 2009 on the Lincoln MKS, Lincoln MKT, Ford Taurus SHO and Ford Flex, all of which use a 3.5L V6 EcoBoost engine. We have since introduced this engine on the 2011 F-150. In early 2010, we began implementing EcoBoost in Europe, where we introduced a 2.0L I-4 EcoBoost engine on the Ford Galaxy, Mondeo and S-MAX and a 1.6L I-4 EcoBoost engine on the Ford C-MAX and Grand C-MAX. In 2011 the all-new Focus will also offer the 1.6L I-4 EcoBoost. In 2011, the 2.0L EcoBoost will make its North American debut in the Ford Explorer and Edge. We also introduced EcoBoost for the first time in the Asia Pacific and Africa region in 2010 with the 2.0L EcoBoost engine on the Ford Mondeo in China. In 2011, we will introduce the 2.0L EcoBoost on the Mondeo followed by the Falcon in 2012 in Australia. We will continue to migrate EcoBoost technology aggressively across our product lineup in all regions. By 2013, Ford will have annual volumes of 1.5 million EcoBoost engines globally.

We are also implementing our highly successful SYNC® in-vehicle communication and entertainment system globally. We will begin introducing SYNC in the Asia Pacific and Africa region on the Ford Edge in 2011 and on the Ford Focus in 2012. We plan to implement SYNC in Europe in 2012, initially on the Focus. To date, Ford has built more than 3 million SYNC-equipped vehicles. We are also continuing to add features to the SYNC system. (See the “Drive Smart” Technologies section for details.)

In addition, we are continuing to standardize materials and parts across vehicle lines. This standardization will not only reduce costs, it will increase quality by reducing the number of different parts we test and manufacture. Four years ago we started commodity business plan teams to find the most effective materials and parts standardization opportunities. This approach was further intensified under the collaboration model of ONE Ford. Each commodity plan features detailed assessments of technology developments, cost drivers, sourcing strategies and global supplier assessments.

We maintain global strategies for the top 138 commodities that go into our vehicles. These 138 commodities, from seats to brake discs to powertrain components, represent about 85 percent of our externally purchased commodity costs.

This approach has proven its success with our new Focus, which is built on our global C-segment platform. Parts commonality on the new Focus increased significantly from prior vehicle programs, reaching 80 percent. In addition, about three-quarters of the supply base for the new Focus will be the same wherever the car is built. Moreover, instead of asking for multiple bids from suppliers on components, a practice known as “market-testing,” Ford pre-sourced 75 percent of the commodities for the new Ford Focus with its preferred suppliers – more than the Company ever has before. The Ford Fiesta also has a high percentage of common parts; the U.S. Fiesta shares 60 percent of its parts with the European and Asia Pacific versions of the car.

We are also simplifying how we work with our suppliers by reducing complexity and expanding parts commonality, leading to lower development costs and greater economies of scale for the Company’s global supply base. Increasing global integration of platforms and parts not only improves our own bottom line and quality, it also improves our suppliers’. For example, by using the same parts across all geographic regions, suppliers can use the same parts for derivatives off a single vehicle platform. This interchangeability of major parts can increase volume per part, allowing suppliers to improve quality and spread the cost of the parts across more vehicles.

Going forward, it will be typical for our global programs to include 80 percent parts commonality, greater than 75 percent pre-sourcing to global suppliers and 100 percent common manufacturing and assembly processes.

By leveraging our global operations, we will be able to deploy our global product development capital and engineering resources to fewer vehicle platforms, drivetrains and powertrains. This commonality of platforms, drivetrains and powertrains, in turn, will reduce complexity in our vehicles and processes. All of these efforts will reduce costs and increase quality. The efficiency and flexibility gains enabled by our ONE Ford plan will allow us to refresh all regional showrooms approximately one-and-a-half times over the 2010–2014 period.