Letter from William Clay Ford, Jr.

As we begin the second decade of the 21st century, the automotive industry finds itself at the intersection of three critical global issues: economic growth, energy independence and environmental sustainability. There are concerns about employment and growth, the availability and affordability of fuel, and the impact of carbon dioxide (CO₂) emissions on our climate.

I am optimistic about the possibilities that lie ahead for our Company despite these challenges – in fact, because of them. I think this is one of the most exciting times in our industry since mass automobile production began more than a century ago. In response to the issues confronting us, some of the most fundamental and enduring elements of the automobile are being radically transformed by new technologies. The companies that lead these changes will create new "green" jobs and profits while reducing fuel use and CO₂ emissions, benefiting both the economy and the environment.

This is the strategy Ford Motor Company is pursuing.

In the 20th century, Ford changed the world by applying innovative technology aimed at improving the lives of its customers on a massive scale. That is our heritage going all the way back to the Model T, and it still drives our efforts today.

Like all automakers, Ford was adversely impacted by the extraordinarily difficult economic conditions we faced over the last several years. We knew we had to do more than just cut costs – we had to transform our Company and our products. Our goal was to be green, global and high-tech.

We focused on growing our business by being a leader in the application of technology that makes our customers' lives better. That includes developing breakthrough technologies to address the critical global issues that impact us all.

To do that we followed the path laid out by our ONE Ford plan and created a single global product development organization to maximize economies of scale. That allows us to fully leverage our research and development resources so that we can introduce new technology at a lower cost and a faster pace. A lot of this new technology is aimed at improving convenience and safety, such as our SYNC® communications technology or our rear-seat inflatable seat belt. But the majority of these efforts are aimed at fuel economy leadership.

We are committed to being a leader in fuel economy in every product segment in which we compete. In keeping with our heritage as a company, we introduce new technology on a large scale. Examples of this include our EcoBoost™ engine technology and advanced transmissions.

In addition to these near-term fuel-efficiency actions, we also are working on a full complement of technologies including fuel cells, biofuel and clean diesel engines. But it appears that the most immediate and dramatic improvements in the next few years and beyond could come from electric vehicles.

In 2009 we announced an aggressive plan to bring pure battery electric vehicles, next-generation hybrid and plug-in hybrid vehicles to market more quickly and affordably. Our plan includes introducing five new vehicles in the next three years that will use advanced lithium-ion battery technology.

This year we will offer the battery-powered Ford Transit Connect Electric commercial van vehicle for fleet customers. In 2011 we will introduce a battery-powered passenger vehicle based on the next-generation Ford Focus. Three other vehicles, including two next-generation hybrids and a plug-in hybrid, will launch in North America in 2012 and Europe in 2013.

In total, we are investing nearly a billion dollars to build electric vehicles, and the battery packs that power them. That investment will allow us to bring our battery system design and development in-house so that it can become a core competency for us in the 21st century.

All of our new product investments are dependent on our being a profitable company. I am pleased to report that this is another area in which we have made tremendous progress.

Last year we continued our ongoing transformation in the face of the global economic crisis. By borrowing all we could ahead of the credit collapse and dramatically cutting our costs, we avoided a government bailout. We then went on to achieve one of the greatest financial turnarounds in corporate history, achieving our first full year of positive net income since 2005.

Our outstanding progress confirmed that we are headed in the right direction, but we know our journey is far from over. We are now fighting our way back to prosperity. We continue to aggressively search for new ways, both big and small, to improve our economic and environmental sustainability. Often the actions we take accomplish both goals.

For example, we recently initiated a program that turns off laptop and desktop computers from a central location during off hours. We estimate this program will reduce our carbon footprint by 16,000–25,000 metric tons a year and save us $1.2 million annually.

We are moving forward in other areas as well. Our continuing progress and leadership in product quality, durability and safety has been confirmed by a number of outside observers and organizations. That includes being ranked among the leaders in the J.D. Power and Associates' 2009 Initial Quality Study, which also marked the eighth year in a row that our quality has improved.

We were especially pleased to be recognized in 2010 as one of the world's most ethical companies by the Ethisphere Institute, a leading business ethics think tank. This award is based on an extensive review of companies' social responsibility efforts, corporate governance and business practices. We were among 100 global companies chosen from a field of thousands of companies in more than 100 countries and 36 industries, and we were the only automaker to receive the honor. Ford was also the only automaker to be listed on Newsweek magazine's 2009 "Green Rankings" of America's 500 largest companies.

Creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success. Perhaps the most gratifying measure of our continued progress is our growing market share around the world. That is proof that we are delivering products that our customers want and value, which is the most basic and essential element of our ongoing success.

In a fiercely competitive global economy there is no room for complacency. We are determined to keep moving forward and will continue to share our progress with you in this report.

William Clay Ford, Jr.
Executive Chairman
June 2010