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 are globally integrating our product development, manufacturing, purchasing and marketing efforts.

In 2009, we 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. As part of these changes, we named Elena Ford as director of Global Marketing, Sales and Service Operations, reporting directly to Jim Farley, Ford's group vice president of Marketing and Communications. We are building on this restructuring by taking many of our core marketing processes global. For example, in 2009 we expanded our Brand Equity and Awareness Tracking system to 14 of our global markets, and in 2010 we are further expanding it to cover 25 global markets. 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 and expand our world-class quality.

Going forward, we will be delivering more vehicles worldwide from fewer core platforms. We have already reduced the number of global nameplates from 97 in 2006 to 59 in 2008, with further reductions planned. In 2007, we had 27 different vehicle platforms, with 29 percent of our total production volume produced from core platforms. In 2012, we plan to have 15 different platforms, with 72 percent of our total production volume produced from core platforms. With our ONE Ford plan, we are working to make all small- and medium-sized Ford vehicles competing in global segments common in North America, South America, Europe and Asia Pacific and Africa by 2013. This will include Fiesta- and Focus-sized small cars, Fusion- and Mondeo-sized midsize cars and utilities, compact pick-ups and commercial vans. In 2012, for example, we expect to produce more than 2 million vehicles from our global "C-car" (Focus-sized) platform and more than 1 million vehicles from our global "B-car" (Fiesta-sized) platform. The efficiencies resulting from our ONE Ford plan and our global product strategies are demonstrated by a 60 percent reduction in engineering costs and a 40 percent reduction in capital costs from 2005 to 2008, per typical new vehicle, with ongoing improvements planned.

We are also beginning the global implementation of EcoBoost™, our new fuel-efficient engine technology. This technology launched in the United States in 2009 on the Lincoln MKS, Lincoln MKT, Ford Taurus SHO and Ford Flex. In early 2010 we began implementing EcoBoost in Europe, where we will introduce a 1.6-liter I-4 EcoBoost engine on the Ford C-MAX and Grand C-MAX and a 2.0-liter I-4 EcoBoost engine on the Ford Galaxy, Mondeo, S-MAX, Edge and Explorer. By 2013, Ford will have annual volumes of 1.5 million EcoBoost V6 and I-4 engines globally.

We will began implementing our highly successful SYNC® in-vehicle communication and entertainment system globally in 2010, beginning with Europe and then migrating to Asia Pacific and Australia. To date, Ford has built more than 2 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. Three 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 now have plans for the top 112 commodities (in terms of value) that go into our vehicles. These 112 commodities, from chassis control arms to brake discs, represent 80 percent of the total production cost of the vehicle, excluding powertrain components.

This approach has proven its success with our new C-segment platform. Parts commonality on the new C-car increased significantly from prior vehicle programs, reaching 80 percent. Moreover, instead of asking for multiple bids from suppliers on components, a practice known as "market-testing," Ford pre-sourced a larger percentage of the commodities for the new Ford Focus with its preferred suppliers.

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.