Other Steps to Reduce Health Care Costs

We have also taken other steps to reduce health care costs. In 2006 we received court approval of a settlement agreement with the UAW that provides for increased cost sharing of health care expenses by retirees presently covered under the Ford UAW Hospital-Surgical-Medical-Drug-Dental-Vision program and established an independent Defined Contribution Retiree Health Benefit Trust (UAW Benefit Trust) which serves as a non-Ford sponsored VEBA. The UAW Benefit Trust is used to mitigate the reduction in health plan benefits for certain eligible present and future retirees, surviving spouses and other dependents. This settlement agreement will remain in effect until September 14, 2011, at which point either Ford or the UAW may provide notice of a desire to terminate the agreement. This agreement will be superseded by the March 28, 2008, Settlement Agreement (previously discussed) if and when that is implemented.

For U.S. salaried employees, during 2005 and 2006, we took steps to have employees and retirees bear a higher portion of the costs of their health care benefits. Active salaried employees were asked to increase their health care contributions in both years. Salaried retirees have Company contributions capped at 2006 levels if they are under 65 (effective January 1, 2007), while the Company contribution for salaried retirees age 65 and over or Medicare eligible is capped at $1,800 per member per year (effective January 1, 2008).

While these actions did result in substantial savings, we still expect our total health care costs to continue to increase. For 2008, our trend assumptions for U.S. health care costs include an initial trend rate of three percent. Over the long term, our steady-state trend rate assumption is five percent, reached in 2011; in any given year, however, the rate could be higher or lower. These assumptions reflect our ongoing focus on health care cost control (including eligibility management, employee education and wellness programs, competitive sourcing and employee cost sharing) and an assessment of the likely long-term trends. They do not include the impact of the March 28, 2008, Settlement Agreement previously discussed.

To promote the health of employees and the Company's financial health, we are also creating a culture of health and wellness for our employees and their families. We are providing resources and tools to help them make sound choices about health care services and coverage and help them understand the benefits of being a better health care consumer. Our efforts include:

• An internal wellness campaign, with the tagline of "Good Health Isn't Automatic, It's Manual." We are encouraging and motivating employees to take control of their health by:
  • Providing the skills that will help them understand their risks, and improve their health habits
  • Encouraging them to be better health care consumers by using health care quality information
• An employee health improvement program, called "Healthy Highway," to prevent and manage illness, which includes:
  • Disease management
  • Individualized wellness programs
  • Health assessments
  • 24-hour phone access to nurse and on-site screening services

We are also collaborating with communities and government agencies. For example, we are:

• Participating in the Southeast Michigan ePrescribing Initiative, which is one of the largest, employer-driven ePrescribing initiatives to encourage the adoption and use of ePrescribing, and validate the impact of ePrescribing technology on improving patient safety and reducing prescription drug costs. This initiative has helped move Michigan into the top 5 of ePrescribing states.
• Promoting and investing in the adoption of health care information technology (HIT) through local initiatives, with funding assistance from various levels of government. HIT will enable physicians and hospitals to have access to all pertinent information needed to treat their patients so that patients may receive the most appropriate care.
• Participating in regional health care quality measurement and public reporting initiatives, with potential data sharing and funding assistance from government.

We hope that, over time, these actions will support the health of our current and retired employees and reduce our competitive disadvantage related to health care costs.