Fostering a Capable and Effective Workforce

It is more important than ever that we invest in our employees, strengthen their technical and leadership skills and recognize them for delivering results that cultivate success. Even during our most difficult times, we kept a focus on learning and leadership development to foster a skilled and motivated team.

We have been standardizing, simplifying and integrating talent management processes, implementing global competency frameworks and enhancing leadership development programs for experienced managers.

All employees are encouraged to invest in their own professional development by developing an Individual Development Plan, or IDP, to help them meet current and future goals while maximizing performance in their current assignments. Employees work with their managers to help them identify strengths and areas for improvement.

We provide a comprehensive range of learning and development resources that align with ONE Ford. These include web-based and classroom training, special projects and task forces, as well as mentoring and coaching to foster functional and technical excellence, encourage teamwork, promote Ford values and enhance our ability to deliver results.

Similar to our vehicle development strategy, our learning and development strategy has been to leverage our global scale and “commonize” as much as possible. We are creating internal “colleges” that provide education and training in areas ranging from finance and information technology to product development and marketing. We offer global leadership development programs, including the Global Leadership Summit, which is aimed at executives and general managers, and the Global Executive Leadership Program, which is geared toward directors and senior managers. We also offer the Salaried Supervisor Institute/Program (SSI) for new or experienced leaders who want to enhance their ONE Ford skills.

ONE Ford is designed to build our employees’ individual capability as well as our organization’s capability to drive the business forward.

A Workforce to Support Our Global Footprint

Over the last few years in our Sustainability Reports, we talked about the difficult reductions made in our salaried and hourly workforce, which were necessary as part of our multi-year effort to return our North American operations to profitability and were aligned to the ONE Ford plan.

This year, we are pleased to discuss our plans to increase our workforce in order to support expected global growth. We have announced plans to add 7,000 new hourly and salaried jobs in the U.S. between 2011 and 2012. In 2011 alone, Ford is adding nearly 4,000 hourly jobs at several of our U.S. plants, including 1,800 at the Louisville Assembly Plant, which will build our next-generation Ford Escape. Ford also will add 750 salaried engineer jobs in product development and manufacturing in 2011. In addition, we are hiring salaried engineers specializing in batteries, system controls, software and energy storage to work on electric vehicles in Detroit and eight other U.S. cities.

As part of our 2007 Collective Bargaining Agreement with the UAW, we committed to in-source 1,559 jobs that were being performed by suppliers. At year-end 2010, we had plans to in-source more than 2,100 jobs, exceeding our commitment by 35 percent. We were able to bring union jobs into our U.S. plants thanks to a collaboration with the union to make the plants more competitive and efficient through modern labor agreements.

These new hires are welcome news for our Company, which witnessed workforce reductions of about 65,700 individuals over a five-year period starting in 2005. Since that time, we have closed or sold 18 manufacturing facilities in North America (including Automotive Components Holding (ACH) plants). Two more Ford facilities are slated for closure in 2011, with an additional facility scheduled to close in the near future.

As of December 31, 2010, our Ford North America business unit had approximately 74,900 salaried and hourly employees, including those at our ACH facilities.

(In the event of workforce reductions, Ford fully complies with the federal Worker Adjustment and Retraining Notification Act (WARN), which requires companies to provide 60-day notifications of plant closures to employees. See the Economy section of this report for more information on workforce issues.)

We have entered into collective bargaining agreements with the UAW in the U.S. and the CAW in Canada. In 2007, we negotiated a transformational agreement with the UAW, enabling us to improve our competitiveness by establishing a Voluntary Employee Benefit Association (VEBA) trust to fund our retiree health care obligations. We completed pre-payment in full of our obligation to the UAW VEBA Trust during 2010 – 12 years before we were required to retire the debt.

In March 2009, Ford-UAW membership ratified modifications to the existing collective bargaining agreement that significantly improved our competitiveness, saving us up to $500 million annually and bringing us near to competitive labor cost parity with the U.S. operations of foreign-owned automakers. The operational changes affected wage and benefit provisions, productivity, job security programs and capacity actions, allowing us to increase manufacturing efficiency and flexibility. Modifications to the VEBA Trust allowed for the smoothing of payment obligations and provided us the option to satisfy up to approximately 50 percent of our future payment obligations to the UAW VEBA Trust in Ford common stock.

On November 1, 2009, the CAW announced that the majority of its members employed by Ford Canada had voted to ratify modifications to the terms of the existing collective bargaining agreement between Ford Canada and the CAW. The modifications are patterned off of the modifications agreed to by the CAW for its agreements with the Canadian operations of General Motors Company and Chrysler, LLC, and are expected to result in annual cost savings. The agreement also confirms the end of production at the St. Thomas Assembly Plant in 2011.

On November 2, 2009, the UAW announced that a majority of its members employed by Ford had voted against ratification of a tentative agreement that would have further modified the terms of the existing collective bargaining agreement between Ford and the UAW. The latest modifications were designed to closely match the modified collective bargaining agreements between the UAW and our domestic competitors, General Motors and Chrysler. Among the proposed modifications was a provision that would have precluded any strike action relating to improvements in wages and benefits during the negotiation of a new collective bargaining agreement upon expiration of the current agreement, and would have subjected disputes regarding improvements in wages and benefits to binding arbitration, to determine competitiveness based on wages and benefits paid by other automotive manufacturers operating in the U.S.

Even with recent modifications, our agreements with the UAW and CAW provide for guaranteed wage and benefit levels for the term of the respective agreements, and a degree of employment security, subject to certain conditions. As a practical matter, these agreements may restrict our ability to close plants and divest businesses during the terms of the agreements. Our collective bargaining agreement with the UAW expires on September 14, 2011; our collective bargaining agreement with the CAW expires on September 14, 2012.

In 2010, we negotiated new collective bargaining agreements with labor unions in Argentina, Brazil, France, Germany, Mexico, Russia, Taiwan and Venezuela.

In 2011, we are or will be negotiating new collective bargaining agreements with labor unions in Argentina, Brazil, France, Mexico, New Zealand, Romania, Russia, Taiwan, Thailand and the UK, in addition to the U.S.

Our improved financial performance resulted in some tangible improvements for our workforce in 2010. These included things such as paying profit-sharing to eligible UAW members, reinstating a 401(k) matching program, awarding 2010 merit increases for our U.S. salaried employees, and awarding bonuses for U.S. employees in 2011. However, as part of our ongoing commitment to maintaining competitive cost structure, we did not award merit increases for 2011.

We know that these compensation and benefits programs are valuable to our employees and their families, and we were pleased to be able to deliver on our promise to improve the competitiveness of our total compensation, as business conditions allow.

For our retirees, we have two principal qualified defined benefit retirement plans in the U.S. The Ford-UAW Retirement Plan covers hourly employees represented by the UAW, and the General Retirement Plan covers substantially all other Ford employees in the U.S. hired on or before December 31, 2003. We established, effective January 1, 2004, a defined contribution plan generally covering new salaried U.S. employees hired on or after that date. Other U.S. and non-U.S. subsidiaries have separate plans that generally provide similar types of benefits. We report on contributions to, and the funded status of, our pension plans in our Annual Report on Form 10-K.