Capacity Alignment

We have reduced and realigned our vehicle assembly capacity to bring it more in line with demand and shifting customer preferences. For example, we are transforming some of our traditional truck plants to produce smaller, more fuel-efficient vehicles. Specifically, we are converting three assembly plants from the production of large SUVs and trucks to the production of small cars, to support what we believe is a permanent shift in consumer preferences to smaller, more fuel-efficient vehicles.

In June 2009, Ford received loans from the U.S. Department of Energy (DOE) to accelerate the production of more fuel-efficient vehicles. These loans were part of the 2007 Energy Independence and Security Act – specifically, Section 136, the Advanced Technology Vehicle Manufacturing Incentive Program. This law authorized the Secretary of Energy to make direct loans to eligible applicants for projects that reequip, expand or establish manufacturing facilities in the United States to produce advanced technology vehicles or qualifying components and also for engineering integration costs associated with such projects. Ford is using a $5.9 billion loan to help it retool 11 factories in the Midwest. We will use $400 million from these DOE loans to retool the Chicago Assembly Plant to produce the next-generation Ford Explorer, which we expect will get at least 25 percent better gas mileage than current Explorer models. We will also use a portion of this money to retool the Michigan Assembly Plant from a large SUV factory into a modern, flexible small car plant that will produce the global Ford Focus compact sedan for the North American market.

We are also closing plants to reduce capacity. Since 2005 we have closed 12 manufacturing facilities. We also announced that four additional plant closures will take effect by 2011. We have announced that we will close the Cleveland Casting Plant in 2010, our Twin Cities Assembly Plant in 2011 and our St. Thomas (Ontario) Assembly Plant in 2011. We have been working to sell or close the majority of our Automotive Components Holdings (ACH) plants that remain in our portfolio. We closed our ACH component manufacturing plant in Utica, Michigan, in 2009. To date, we have sold five ACH plants and closed another five. We plan to close a sixth plant in Indianapolis in 2011. We are exploring our options for the remaining ACH plants (Milan, Sheldon Road, Saline and Sandusky), and intend to transition these businesses to the supply base as soon as practicable.