Migration to Alternative Fuels and Powertrains

Ford is currently the largest domestic producer of hybrid vehicles, with more than 160,000 on the road as of March 2011. Ford introduced its first hybrid in 2004, the Ford Escape Hybrid, which was also the world’s first hybrid SUV. We followed up with the Mercury Mariner Hybrid in 2005. In early 2009 we further expanded our hybrid vehicle lineup by introducing the Ford Fusion and Mercury Milan Hybrids. All of these vehicles are full parallel hybrids, meaning they can run exclusively on battery power, exclusively on gas power or on a combination of both to deliver the best overall fuel efficiency. We are currently increasing our hybrid volume, targeting a cost reduction of more than 30 percent in our 2012 next-generation hybrid systems and preparing for hybrid capability across our highest-volume global product platforms.

The Ford Fusion Hybrid has a U.S. Environmental Protection Agency fuel economy rating of 41/36 mpg city/highway, making it the most fuel-efficient midsize sedan in the U.S.1 The Fusion Hybrid’s fuel economy significantly exceeds that of its nearest midsize sedan competitor, and it can go more than 700 miles on a single tank of fuel. It includes an innovative new SmartGauge™ with EcoGuide instrument cluster that coaches hybrid drivers to maximize fuel efficiency.

In 2010, we launched the Lincoln MKZ Hybrid, which is the most fuel-efficient luxury sedan in America and is available at the same price as the gas model MKZ. In 2011, we announced the introduction of a hybrid version of the Ford C-MAX multi-activity vehicle. This will be one of three electrified vehicle options based on our C-platform. The others are the Focus Electric (a battery electric vehicle, or BEV), the C-MAX Energi (a plug-in hybrid, or PHEV) and the C-MAX Hybrid. The hybrid variant of the C-MAX will build on the fuel economy leadership of the Ford Fusion Hybrid, already the most fuel-efficient mid-sized sedan in America. This vehicle will use the Company’s powersplit hybrid architecture, with improved fuel efficiency and a lighter, smaller lithium-ion battery system. The C-MAX Hybrid and C-MAX Energi, along with another still-to-be-announced HEV, will be introduced in North America by 2012 and in Europe by 2013.

Our next-generation hybrids will also have a suite of driver information systems to help drivers maximize fuel efficiency. They will feature an enhanced version of the MyFord Touch™ driver interface system that can be configured to show different levels of information, including fuel and battery power levels, as well as average and instant miles per gallon.