The centerpiece of our near-term, fuel-economy improvement efforts is the recently announced EcoBoost engine. The EcoBoost engine uses a combination of turbocharging, direct injection and reduced displacement to deliver significant fuel-efficiency gains without sacrificing engine power or performance. EcoBoost engines will improve vehicle fuel economy up to 20 percent and reduce CO2 emissions up to 15 percent. Compared to other fuel-efficiency technologies, EcoBoost is highly affordable. For instance, it has a significantly lower purchase price than clean diesel and hybrid technologies. The EcoBoost V-6 will first be offered on the new Lincoln flagship sedan, the MKS, in 2009, followed by the Ford Flex and other vehicles. By 2012, Ford will be offering EcoBoost V-6 and I-4 engines in half-a-million vehicles annually in North America.

To further improve the fuel economy of our vehicles, we are implementing a dual-clutch transmission system called PowerShift. PowerShift combines manual and automatic transmission technologies to deliver the fuel efficiency of a manual transmission with the driving ease of an automatic. PowerShift also uses six speeds instead of the four or five on most automatics, further increasing fuel efficiency. PowerShift technology will increase fuel efficiency by 6 to 10 percent compared to traditional automatic transmissions. A "wet clutch" version of this technology has already been implemented in Europe on the Ford C-MAX 2.0-liter Duratorq TDCi diesel and the Volvo C30, S40 and V50 diesel models. The "dry clutch" version will be introduced in the U.S. in 2010 on the all-new Ford Fiesta and on the Ford Focus.

We are also working to improve fuel economy by significantly decreasing the weight of our vehicles. To do this, we are increasing our use of unibody vehicle designs, which provide many of the benefits of truck-based SUVs, such as roominess, all-wheel drive and higher stance while significantly reducing total vehicle weight. The Ford Edge and Lincoln MKX crossovers, which have been well-received in the marketplace, use lightweight unibody designs. We are also planning to launch additional small cars, commonly referred to as "B-cars." These will include an all-new Fiesta to be sold in Europe, Asia, South Africa, Australia and the Americas between 2008 and 2010.

Other weight-reduction plans include the extensive use of lighter-weight materials such as aluminum, magnesium, natural fiber and nano-based materials. These materials can reduce the weight of our vehicles by 250 to 750 pounds, without compromising vehicle size, safety, performance or customer-desired features. Please see the Environment section for further information on materials-based weight reductions.

We are also planning improvements to the aerodynamics of our vehicles through better design and wind tunnel optimization, which will raise fuel economy by up to 5 percent. We improved the Ford Focus ECOnetic model, for example, by lowering the vehicle, adding an aerodynamics kit and using low rolling resistance tires. We also increased the fuel efficiency of the Ford F-250 pickup by more than 1 mph by reducing aerodynamic drag and optimizing gearing.

We are also improving the efficiency of every vehicle subsystem that affects fuel economy. For example, we are phasing in Electric Power Assisted Steering technology (EPAS), which typically will increase fuel economy 0.09 to 0.17 gallons per 100 miles and will decrease CO2 emissions by up to 3.5 percent over traditional hydraulic systems, depending on the vehicle and powertrain application. We have already implemented this technology on the 2008 Ford Escape and Mercury Mariner gas and hybrid vehicles. By combining EPAS with aerodynamics improvements, the 2008 Escape and Mariner gas and hybrid vehicles achieved approximately 8 percent fuel economy improvements compared to the previous model year. On the new Ford Fiesta, EPAS will provide a 3 to 4 percent improvement in fuel economy on the 1.4 liter Duratorq Diesel model. EPAS will be implemented on the Ford Fusion and Mercury Milan in late 2008, the Ford Flex and Lincoln MKS with the GTDI engine in 2009, and the Ford Fiesta, Focus, Mustang, Taurus and Explorer in 2010. Ultimately, we plan to introduce this technology into all of our light-duty vehicles.

Electrical systems are another area in which we can make progress. By reducing vehicle electricity loads and increasing the efficiency of vehicle electrical systems, we can increase fuel efficiency. Our forthcoming Battery Management Systems (BMS), for example, will control the power supply system (in particular the alternator) to maximize the overall efficiency of the electrical system and reduce its negative impacts on fuel economy. This is accomplished by generating vehicle electricity in the most fuel-efficient situations, such as during vehicle deceleration. In less fuel-efficient situations, alternator power is unloaded unless there is an urgent need for electricity generation due to in-vehicle electricity requirements, such as for entertainment systems. BMS will be introduced in Europe soon and on the Ford Edge in North America in 2011. We also have introduced more efficient alternators, which improve fuel economy by 0.1 miles per gallon over traditional alternators. For information on our long-term efforts to use electrical systems and communications technologies to increase fuel economy, please see Design for Fuel Efficiency in the Environment section.

We are also deploying Aggressive Deceleration Fuel Shut-Off (ADFSO) technology, which allows fuel supply to the engine to be shut off during vehicle deceleration and then automatically restarted when needed for acceleration or when the vehicle's speed approaches zero. This new system builds on the Deceleration Fuel Shut-Off technology available in our existing vehicles by allowing more aggressive use of the fuel shut-off feature without compromising driving performance or non-CO2 emissions reductions. Improved fuel shut-off will increase fuel economy by an average of 1 percent. An additional benefit of the ADFSO technology is increased deceleration rates, which should reduce brake wear and improve speed control on undulating roads. This technology will be available in mid-2008 on the new Ford Flex and the Lincoln MKS. In the fall of 2008, it will be available on the 2009 model year Ford F-150, Ford Expedition and Lincoln Navigator regular and extra-long models, as well as on the Ford Escape, Mercury Mariner and Mazda6. In the next two to three years we plan to implement this technology on as many vehicles as possible, beginning with front-wheel-drive, six-speed-transmission vehicles.

And finally, we are developing a "stop/start" technology that shuts down the engine when the vehicle is stopped and automatically restarts it before the accelerator pedal is pressed to resume driving. This technology will maintain the same vehicle functionality as a vehicle without the technology, but it will improve city driving fuel economy by up to 6 percent. Stop/start technology includes sensors to monitor functions such as cabin temperature, power supply state and steering input, so that vehicle functioning remains exactly the same to the driver as when the engine remains on continuously. If the system senses that a vehicle function has been reduced and will negatively impact the driver's experience, the engine will restart automatically. Start/stop technology is already being used in our hybrid vehicles. However, this new technology will provide a more cost-effective method of implementing the technology on a larger volume of non-hybrid vehicles. We are planning to implement this new technology by 2012.