Sustaining Ford

After enduring several of the most difficult years in our Company's history, Ford turned a corner in 2009. In the face of a global economic and financial crisis, as well as unprecedented events in the U.S. automotive industry, Ford achieved $2.7 billion of net income, its first full year of positive net income since 2005, and a $17.5 billion improvement over 2008.

Despite the continued economic slump of 2009, which included the bankruptcies of two of our domestic competitors and a nearly 40 percent cumulative drop in new vehicle sales in the United States since 2005, we gained market share in most of our business units across the globe, including our first full-year market share gain in the United States since 1995.

Based on our improving performance, the gradually strengthening economy and our present assumptions, we now expect to deliver solid profits in 2010 with positive Automotive operating-related cash flow.

Our progress in 2009 offers the strongest proof yet that our business strategy is successful and that we are forging a path toward profitable growth through teamwork and leveraging global scale. Three years ago, we created the "ONE Ford" plan to guide our business toward better times. We cascaded the plan across our global organization. And we are executing the plan.

Ford is steadfastly focused on creating a strong business that builds great products that contribute to a better world. As part of our plan, we continue to press forward to globalize vehicle platforms that can be adapted to meet specific regional needs. Flexible manufacturing capabilities allow us to bring products to market with greater speed and efficiency than ever before.

Our commitment to innovation is supported by four principles that inform and guide every design and engineering effort: to be best in class in quality, safety, fuel efficiency and the "smart technologies" that make the driving and riding experience easier and more enjoyable. We are working to continually raise the bar on quality and safety. Fuel efficiency and smart technologies are strategically important because green technology and smart innovations are helping us serve our customers and differentiate Ford.

Our sustainability strategy has helped us to understand the global challenges driving the need for innovation in these areas and positions us to succeed in delivering them. We believe that we have been able to weather these last difficult years because our business strategy and our sustainability strategy are aligned and intertwined.

But we're far from complacent and we're continuing to address adverse conditions. Notwithstanding many positive signs of an economic recovery, the global business environment remains extraordinarily challenging, with increasingly intense competition from other automakers. We know the road ahead won't be easy.

We are focused on our future and our ultimate objective: profitable growth for all. Our ONE Ford transformation plan was developed in 2007 to create a leaner, more-efficient global enterprise. It is anchored by four key priorities:

• Aggressive restructuring to operate profitably at current demand and changing model mix
• Accelerated development of new products our customers want and value
• Financing the plan and improving our balance sheet
• Working together effectively as one team to leverage our global assets

While we are well on our way, it's clear that our ONE Ford transformation is not yet complete. By continuing to work together and staying focused, we believe we can deliver a future that includes benefits for our stakeholders, including our employees, our investors, our business partners, our suppliers and our dealers. When Ford succeeds, so do the broader communities in which we operate.

Our path toward long-term viability began well before the recent economic downturn. We have been fundamentally restructuring our operations in ways that impact every part of our business – from product innovation and fuel efficiency to labor relations and our interactions with suppliers and dealers. These last years have demonstrated how critical it is for Ford to stay focused on issues of sustainability, even in difficult economic times.

We recognized that our business model needed to change, and we have been changing it. One key element of our plan has been our increased focus on a more balanced portfolio that includes more small and midsize vehicles, to respond to consumer demands.

We've also been very clear about our product strategy to deliver improved fuel economy and reduced greenhouse gas emissions through affordable advanced technologies. We continue to make improvements in gasoline-powered vehicles through the use of EcoBoost™ engines, six-speed transmissions, electric power-assisted steering and other technologies. We doubled our hybrid vehicle production, and we're on the way to delivering the first of our pure battery electric and plug-in hybrid vehicles. It is a practical, comprehensive approach designed to provide affordable fuel economy to millions of drivers around the world.

Over the next few years, Ford is investing nearly $14 billion in advanced technology vehicles in the United States alone.

Our blueprint for sustainability, which highlights how we will meet our product carbon-dioxide-reduction goal, has positioned us to lead in the industry. And on the supply side, we are continuing to strengthen our U.S.-located supply base, instituting practices designed to increase collaboration, provide for data transparency and expand the volume of business with select suppliers – all with an eye toward building a more sustainable business model. We're also focused on improving transportation options for people in urban areas to promote sustainable mobility and build electric vehicles for these markets.

In 2010, we will deliver substantially more new or freshened products by volume than in 2009 globally, bringing to market an unprecedented volume of new products – with class-leading fuel efficiency, safety, smart design and value.

Offering vehicles with smaller environmental footprints, tackling the mobility challenges of rapidly growing urban centers, and tailoring our products and services to increasingly diverse global markets are not peripheral to Ford's future success – they are central to it.