FORD MOTOR COMPANY BUSINESS PLAN

SUBMITTED TO THE 

HOUSE FINANCIAL SERVICES COMMITTEE 

December 2, 2008 
1

INTRODUCTION

 Ford Motor Company welcomes the opportunity to submit our Plan to the House 

Financial Services Committee, and appreciates the time and attention Congress is 

devoting to the critical issues that confront the domestic automotive industry in the 

current economic environment. 

 In this submission, we first provide an overview of the current business 

environment, then discuss our Plan for viability, and conclude by answering the specific 

questions posed in the correspondence received from Speaker of the House Nancy 

Pelosi and Senate Majority Leader Harry Reid. 

We all have a shared interest in protecting American jobs, a vital American 

industry and American innovation. As the Committee knows so well, the ongoing 

economic and credit crisis has affected many Americans – from losing their jobs to 

losing their homes. The recession also has had very negative ramifications for the U.S. 

auto industry, which supports five million jobs in all 50 states and spends $12 billion 

annually on research and development in the U.S. – more than any other industry. 

We fully appreciate that the industry needs to transform itself to better compete 

by developing safer, greener and even better quality vehicles. We recognize Congress’ 

important role as guardian of the American taxpayers, and we hope in our submission 

that we address your valid concerns about our potential for future viability and restore 

your confidence in our commitment to bring change and accountability. 

As a company and as an industry, we readily admit 

that we have made our share of mistakes and 

miscalculations in the past. We would ask 

Congress to recognize, however, that Ford did not 

wait until the current crisis to begin our restructuring 

efforts, and that much of what we describe below 

are actions we have taken and decisions we have 

made about the future that have already put us on a

path to long-term viability. During the past several 

years, Ford has begun a fundamental restructuring 

in the way we do business – a restructuring that, as 

described more fully below, affects every part of our 

business, including product innovation, fuel 

efficiency, labor relations, suppliers, and dealers. In 

short, Ford recognized that our business model needed to change, and we are 

changing it. We share Congress’ concern that our industry needs an aggressive 

restructuring, and we at Ford already have undertaken many of the decisive actions that 

we believe are necessary to ensure our future success. 

While we have much more 

work ahead of us, Ford did 

not wait until the current 

crisis to begin our 

restructuring efforts, but 

has already begun a 

fundamental restructuring 

in the way we do business. 

Our early efforts showed 

promise before the credit 

and economic crises hit 

earlier this year. 
2

In fact, Ford was profitable in the first quarter of 2008 before the credit and 

broader economic crisis rapidly and dramatically shrunk demand for automobiles to a 25 

year low. That’s why we respectfully ask Congress to work with us to provide temporary 

access to loans that, if needed, will help us continue to restructure in this difficult 

economic period. 

We note that Ford is in a different situation from our competitors, in that we 

believe our Company has the necessary liquidity to weather this current economic 

downturn – assuming that it is of limited duration. If the downturn is longer and deeper 

than we now anticipate, however, access to government financing would be important to 

help us be able to continue to implement our Plan and benefit when the economic 

recovery inevitably arrives. While we hope we do not have to access the loans, we 

believe it is critically important that loans are available to us and the domestic auto 

industry. 

 

 In addition, the credit markets currently remain frozen and are not available to 

finance the industry’s cyclical needs. This means that our liquidity through 2009 could 

come under increasing pressure if a significant industry event, such as a bankruptcy of 

one of our competitors, causes a disruption to our supply base, dealers and creditors. 

 We are acutely aware that our domestic competitors are, by their own reporting, 

at risk of running out of cash in a matter of weeks or months. Our industry is an 

interdependent one. We have 80 percent overlap in supplier networks. Nearly 25 

percent of Ford’s top dealers also own GM and Chrysler franchises. That is why the 

collapse of one or both of our domestic competitors would also threaten Ford. 

 

 For Ford, the availability of a government line of credit would serve as a critical 

backstop or safeguard against these conditions as we drive transformational change in 

our Company. Accordingly, given the significant economic and market risks that exist, 

Ford respectfully requests that government funding be made available to us, in the form 

of a “stand-by” line of credit, in the amount of up to $9 billion. This line of credit would 

be a back-stop to be used only if conditions worsen further and only to the extent 

needed. 

 Our recommended terms of the loan would be: (i) at government borrowing rates; 

(ii) a revolving credit line with a ten year duration; and (iii) with additional conditions 

consistent with the TARP legislation. 

 

Ford’s Request: 

A “stand-by” line of credit in the amount of up to $9 billion 

at Government borrowing rates, for a 10 year term, with TARP conditions, 

 to support our restructuring, including the acceleration of products 

that consumers want and value. 
3

THE CURRENT BUSINESS ENVIRONMENT

 The United States economy is in a recession. The financial crisis, the worst in 

several decades, has exacerbated the downturn and diminished economic growth 

prospects in the months ahead. 

 The auto sector is one of the first to suffer from bad economic conditions – 

indeed, spending on new vehicles historically represents about 4% of GDP and 

therefore is closely tied to economic conditions. As the financial crisis persists, both 

credit availability and consumers’ weakened confidence have contributed to a drastic 

decline in vehicle sales. There has been a broad-based tightening of origination and 

underwriting standards for automotive financing, spreading beyond the sub-prime arena 

to affect many prime borrowers as well. The Federal Reserve Senior Loan Officers’ 

survey shows that banks’ willingness to extend consumer installment loans has only 

been weaker at one time in the past 30 years, and that was in June of 1980. Over 60% 

of banks have tightened standards for consumer credit. 

 The forward economic outlook is also negative, with a wide range of possible 

outcomes due to the uncertain financial market environment. Real GDP is projected to 

decline significantly in the current quarter, as much as 4% or more as compared to the 

prior quarter (at an annualized rate). Consumer confidence is the weakest since the 

early 1980s, with nearly three in four consumers expecting the recession to deepen in 

the months ahead, according to the recent Survey of Consumers report released by 

Reuters/University of Michigan. 

 The economy is projected to contract through the first half of 2009, with a peakto-trough decline in real GDP in the 2.0% to 2.5% range. The housing sector decline, 

as measured by housing starts and sales, is expected to weaken somewhat from 

already low levels. 

 Spending by consumers has already fallen at an annual rate of nearly 4% in the 

third quarter (as compared to the second quarter). A further contraction in consumer 

spending is underway in the current quarter, with an additional step down likely in the 

first quarter of 2009. Consumers are weighing likely further employment declines and 

responding by increasing their saving rates and pulling back on purchases, especially of 

durable goods such as automobiles. 

 The financial crisis, now 16 months old, persists. Despite the actions taken by 

the Federal Government and the Federal Reserve (and other governmental institutions 

around the world), there is no near-term end in sight. Government actions to encourage 

consumer lending and open capital markets have, in our view, been of limited 

effectiveness to date, as banks have retained government support to improve their 

financial leverage and shore up their own financial health rather than using it to make 

resources available to businesses and consumers. The present credit environment has 
4

severely limited consumer and commercial access to financing and negatively impacted 

both consumer confidence and spending. 

The impact of the credit crisis has been acutely felt 

in the domestic automotive industry. October 2008 

U.S. industry sales volumes were at the lowest 

annualized level in 25 years, and down 34% from 

2007, and November sales are tracking at similar 

low rates. Compared with the first quarter of 2008, 

the industry annual running rate in October has 

fallen by 31%, which roughly equates to an annual 

industry selling decrease of almost five million units. Moreover, this sales decline 

occurred over a short period of time, making it virtually impossible for manufacturers to 

reduce their costs to match the precipitous revenue decline. Ford has responded 

aggressively by reducing production to meet demand, but this responsible action puts 

additional pressure on our business by decreasing our cash reserves as payables 

continue to come due while revenues decline. 

In addition, we now believe that the global economic and industry downturn will 

be broader, deeper and longer than previously expected, with industry volumes in 2009 

expected to decline from the low levels of 2008. Our suppliers and dealers, already 

stressed, will be under increasing pressure. Moreover, continuing turbulence in the U.S. 

and worldwide economies and tight credit markets will continue to undermine consumer 

confidence and impact our business. 

The present credit environment also has severely 

limited the ability of the automotive finance 

companies like Ford Motor Credit Company to 

access the public debt and securitization markets, 

and is significantly impairing our ability to support 

dealer and consumer financing needs. Banks and 

investors are exhibiting an aversion to risk and a 

willingness to invest in only the highest-quality 

financing instruments, and preferably in government instruments or governmentguaranteed debt. This risk aversion has expanded to a level where it is challenging to 

find financial counterparties to transact even simple interest rate and currency swaps, 

further contributing to a significant slowing of U.S. economic activity. These issues 

have further constrained the cash available from Ford’s normally profitable automotive 

finance company to support our automotive business.

 It is in the face of the deepening economic and credit crisis that Ford is asking 

the Government to make assistance available to the domestic automotive industry even 

though we have a Plan for our future which, with exception to Department of Energy 

funding under Section 136, does not assume government assistance. We do so for at 

least four reasons. 

The recession and 

financial crisis has 

resulted in automotive 

industry sales volumes at 

the lowest annualized level 

in 25 years. 

The credit environment 

has severely limited the 

ability of Ford Motor Credit 

Company to support 

dealer and consumer 

financing needs. 
5

 First, we are acutely aware that our supply base, our labor structure, and our 

dealer network, among other factors, are sized for an industry and a market share that 

the domestic companies can no longer support. The current crisis has generated 

considerable debate about the perceived need to restructure our industry in the national 

interest. As the nation’s oldest automotive company, Ford Motor Company is a vital 

participant in that debate. 

Second, we are aware that our domestic competitors 

are, by their own reporting, at risk of running out of 

cash in a matter of weeks or months. Because our 

industry is an interdependent one, with broad overlap 

in supplier and dealer networks, the collapse of one 

or both of our domestic competitors would threaten 

Ford as well. It is in our own self-interest, as well as 

the nation’s, to seek support for the industry at a time 

of great peril to this important manufacturing sector 

of our economy. 

Third, we hope that demonstrating our Plan to 

Congress will hasten approval of our application with 

the FDIC to establish an Industrial Loan Company as

part of our finance arm, Ford Motor Credit Company. 

Having an Industrial Loan Company will place us on 

a more equal footing with our major competitors who

already have such banks. More importantly, it will 

benefit consumers by providing us another resource for reasonably priced capital, thus 

helping us provide credit to our customers and dealers. 

 Finally, the industry cannot use the current financial markets to finance its 

cyclical needs, as these markets are presently frozen, and any one of the following 

items could put severe pressure on our short-term and long-term liquidity: 

• A significant industry event, such as a bankruptcy of one of our competitors, 

causes a disruption to our supply base, dealers and creditors; 

• The economic decline is greater than present forecasts and industry volumes 

decline to per capita levels not seen since the great depression era; or 

• There is a global economic collapse, creating additional cash demands. 

In addition to making financing available to the automotive industry, there are other 

important policies that will help enhance the industry’s global competitiveness. First, 

Ford was proud to support stronger CAFE standards, and we are absolutely committed 

to meeting them. However, we urge Congress to maintain one economy-wide set of 

national standards on fuel economy. A patchwork of standards would place enormous 

financial and engineering burdens on manufacturers and have the effect of reducing 

consumer choice -- all for little or no environmental benefit. Second, in developing a 

stimulus bill to drive our country’s economic recovery, we ask Congress to consider 

Ford is supporting the 

request for help from the 

Federal government 

• To be part of the 

national debate 

• Because of the threat to 

Ford from a significant 

event involving one of 

our competitors 

• In the hopes of 

hastening approval of 

our ILC application 

• Because frozen credit 

markets might threaten 

liquidity under certain 

scenarios. 
6

incentives for consumers to trade in older vehicles and move to more fuel-efficient 

vehicles. We also ask that continued R&D incentives be considered: the 

automobile industry spends $12 billion annually on research 

and development – more than any other industry. Third, we 

look forward to working with Congress on comprehensive 

health care reform that will improve patient care, bring greater 

transparency, utilize new health information technologies and 

drive down costs. Fourth, currency is the medium in which 

trade occurs – it can be as important a determinant of trade 

flows as the goods themselves. Currency values must be 

fairly determined – through an open market – not predetermined by governments to support their domestic 

industries. Finally, we support free trade, but it needs to befair trade. Agreements such 

as the recent US-Korea trade pact hurt domestic manufacturers because they maintain 

non-tariff barriers to U.S.-produced goods and prevent a level playing field. 

THE FORD MOTOR COMPANY VIABILITY PLAN

Our Transformation to Date

 When Ford embarked on our transformational Plan it was with clear recognition 

that Ford’s business model needed to change dramatically, and quickly, if we were 

going to succeed. Our Board of Directors and Company management knew that 

“business as usual” would deliver “results as usual” -- a steady decline in performance 

and a failure to earn returns that would cover our cost of capital much less create 

positive shareholder value. 

 Historically, Ford has operated as four largely separate automotive companies 

around the globe: (i) a North American company; (ii) a South American company; (iii) a 

European company; and (iv) an Asia Pacific company. Each of these separate 

companies had its own product development systems, manufacturing processes, 

suppliers, and other duplicative structures. While this structure may have made sense 

when the automotive industry was in its infancy and communications, transportation, 

and other infrastructures made economies around the world more isolated, the 

separation of our operations has in more recent years led to unnecessary and inefficient 

duplication, waste and a failure to realize the substantial benefits of scale available to a 

global enterprise such as Ford. 

 In recent decades, moreover, Ford expanded into other businesses. At the 

beginning of this decade, our brand portfolio included Aston Martin, Jaguar, Land Rover, 

and Volvo, and we also owned adjacent businesses such as Hertz and the Kwik-Fit 

aftermarket parts business in Europe. As we attempted to manage these and other 

businesses, our global enterprise became more difficult to manage and we neglected to 

ensure that the Ford “Blue Oval” brand retained its luster in all segments and its 

Ford supports 

other government 

policy initiatives 

to enhance the 

automotive 

industry’s global 

competitiveness. 
7

historical preeminence in all of our markets as a symbol that Ford Motor Company was 

there to provide reliable and affordable transportation for all. 

 The situation was especially acute in the United States. Throughout the 1990s 

and into this decade, we became increasingly dependent in the U.S. market on trucks 

and large SUVs, which were in heavy demand by consumers and generated large 

profits. Many of our competitors, both foreign and domestic, likewise followed market 

demand and added more truck and SUV products to their lineups. Our focus on these 

vehicles, however, left us exposed in the event of a market shift to smaller, more fuelefficient vehicles. In anticipation of such a shift, and inspired by the compelling vision 

outlined by our Executive Chairman, Bill Ford, we began to refocus our portfolio earlier 

in this decade, introducing a new line of mid-size cars (the Fusion, Milan, and MKZ) as 

well as the first hybrid sport utility (the Ford Escape -- still the most fuel efficient sport 

utility available with an EPA city mileage rating of 34 miles per gallon). When fuel prices 

shot up rapidly earlier this year, the shift occurred much more quickly and was much 

more pronounced than we or anyone else in the industry anticipated. 

 In addition, we had, over a period of many years, created a labor structure that 

was uncompetitive with the foreign-owned transplant operations that had been 

established in the United States. And, we made small cars in the United States largely 

because of a requirement to meet federal Corporate Average Fuel Economy standards. 

Fortunately, within the global Ford enterprise we had 

models of success on which to pattern a North 

American transformation. Both our European and 

South American operations had substantially 

completed transformational plans that had returned 

those operations to profitability from years of losses. 

Our European and South American operations had 

developed attractive new products, matched capacity

to demand and implemented progressive 

agreements with labor. Moreover, these markets, 

with historically high fuel prices, were primarily small 

vehicle markets, so we knew that, as a Company, we could make attractive small 

vehicles that could deliver profits, particularly in a high fuel price environment. 

 It was with the knowledge of our success in Europe and South America that we 

developed a new plan for our Company. Our Plan is summarized as “One Ford – One 

Team • One Plan • One Goal.” One Ford has firmly established the principle of one 

global company, with One Team, working together as a lean, global enterprise for

automotive leadership, as measured by our customer, employee, dealer, investor, 

supplier, union, and community satisfaction. 

 As part of the One Team approach, we have implemented and continue to 

implement a disciplined business plan process to regularly review our business 

environment, risks and opportunities, our strategy, our Plan, identify areas of our Plan 

Ford recognizes the 

factors that caused our 

current situation, and 

began to address those 

factors aggressively based 

on successful turnarounds 

in our European and South 

American businesses. 
8

that need special attention and pursue opportunities to improve our Plan. Everyone is 

included, openness is encouraged, our leaders are responsible and accountable, facts 

and data drive our decisions, high-performance teamwork is a performance criteria and 

we follow this process every week, every month, and every quarter, driving continuous 

improvement. 

 Our One Team is unified in pursuing the four elements of our One Plan: 

• Aggressively restructure to operate profitably at the current demand and 

changing model mix; 

• Accelerate development of new products our customers want 

and value; 

• Finance our plan and improve our balance sheet; and 

• Work together effectively as one team, leveraging our global assets. 

Our One Team and our One Plan are laser-focused 

on delivering our One Goal: An exciting viable Ford 

Motor Company delivering profitable growth for all.

As business conditions continue to change quickly, 

we are responding with decisive action: 

• We are implementing our strategy to focus on One Ford and simplify our brand 

structure. As a result, we sold Aston Martin, Jaguar and Land Rover 

and the majority of our ownership of Mazda, and we have announced that we 

are exploring strategic alternatives for Volvo, including divestiture. We have 

divested additional other non-core assets. These sales have also helped our 

overall liquidity. 

• We have improved our Ford Blue Oval brand favorability with consumers by reestablishing the brand’s historical association with affordable, safe, and 

sustainable transportation for all, offering the best automotive value. 

• We obtained financing for our Plan by going to the more receptive capital 

markets in December 2006 to raise $23.5 billion in liquidity, consisting of $18.5 

billion of senior secured debt and credit facilities, secured by substantially all of 

our domestic assets, and $5 billion of unsecured convertible debt. 

• Faced with a possible financial crisis at our former in-house parts supplier in late 

2005, we took back 17 North American plants from Visteon and formed 

Automotive Components Holdings, LLC (ACH). We have worked with the UAW 

to restructure each business and either sell or close the facilities. In doing so, 

we have reduced the costs to Ford, eliminated the risk of disruptions to our 

business, and treated the affected employees in a responsible way. By year end, 

we will have returned two plants to Ford, closed four plants and sold five plants. 

We also have announced the future closure of two more plants, and have four 

plants left for which we are currently exploring the options to sell or close. 

• Together with the United Auto Workers (UAW), we negotiated a transformational 

labor agreement in 2007, with a lower wage structure for new employees and 

flexible work rules, and we continue to implement our Voluntary Employee 

Ford is executing decisive 

actions to achieve our 

ONE FORD plan, aligned 

around ONE GOAL: 

Profitable growth for all. 
9

Beneficiary Association (VEBA) plan to transfer long-term responsibility for 

retiree health care to the UAW. 

• We are cutting operating costs in North America, reducing by $5 billion 

cumulatively our annual operating costs (which we measure at constant volume, 

mix and exchange, excluding special items) by year-end 2008 as compared with 

2005, and we continue to implement additional cost reduction actions in North 

America and around the world. 

• We continue to improve our vehicles to achieve leadership in quality and fuel 

economy and to maintain our leadership in safety and interior comfort and 

convenience technology – further enhancing the Ford brand. 

• We are positioned through our focus on the Ford brand to leverage our global 

assets and scale to manufacturer smaller, fuel-efficient vehicles in North 

America and the rest of the world, including our global Ford Fiesta and Focus in 

2010. 

• We have taken painful but necessary downsizing actions to match capacity to 

real demand, including closing 17 plants over the past five years and downsizing 

by 12,000 salaried employees and 45,000 hourly employees in North America in 

the past three years. 

 Our Ford Credit automotive financial services business, with assets of $130 

billion as of September 30, 2008, provides wholesale financing for about 80% of the 

Ford, Lincoln and Mercury dealerships in the U.S. It also provides retail and lease 

financing for four million U.S. consumers. 

 Ford Credit has taken similarly significant actions, including: 

• Refocusing its financing business on our Ford, Lincoln and Mercury brands, and 

achieving a globally competitive cost structure. 

• Exiting several Asia Pacific markets and forming international business 

partnerships to facilitate the repatriation of capital to support the U.S. business. 

• Restructuring its U.S. operations and transitioning from a 160-branch network to 

six regional business centers. 

 Implementing our One Ford Plan resulted in a profit for the first quarter of 2008 

before the full impact of the credit and economic crises was felt. 
10

Our Plan for North America

I. Aggressively restructure to operate profitably at the current demand and 

 changing model mix

 We continue to restructure our North American operations aggressively to be 

able to operate profitability at the current demand and vehicle mix. This restructuring is 

taking place across all of our operations, in the areas of manufacturing, supplier 

relationships, dealer relationships, dealer and consumer credit operations and 

personnel. 

 Manufacturing. We have a strong U.S. manufacturing presence, with 10 vehicle 

assembly plants and 26 powertrain, stamping and components plants across the U.S. 

We are converting three truck assembly plants to small car production, to support what 

we believe is a permanent shift to smaller more fuel-efficient vehicles. To this end, 

approximately 50% of future U.S. capacity will be 

allocated to small and medium-size vehicles. In 

addition, nearly all of our U.S. assembly plants will 

have flexible body shops by 2012 to enable quick 

response to changing consumer demands and nearly 

half of our transmission and engine plants will be flexible, capable of manufacturing 

various combinations of transmission and engine families. We have announced four 

additional plant closures between 2009 and 2011 and we have announced our intent to 

close or sell our four remaining ACH plants. We will continue to aggressively match our 

manufacturing capacity to real demand. 

 Suppliers. We have been working extremely hard to strengthen our U.S. located 

supply base, which represents 80% of our North American purchases. We have 

instituted a number of business practices with these suppliers designed to increase 

collaboration, provide for data transparency and 

expand the volume of business with select suppliers, 

while building a more sustainable business model. 

We have also been able to reduce the total number 

of production suppliers eligible for major sourcing 

from Ford from 3,300 in 2004 to approximately 1,600 suppliers today, with a further 

reduction to 750 suppliers planned. We have paid specific attention to strengthening 

our minority and women suppliers – which currently account for about $4 billion of our 

annual $35 billion of purchases from U.S. supplier locations. Our consolidation efforts 

have resulted, and will result, in more business for our major suppliers which will 

increase their financial strength. 

 Moreover, as we move aggressively to global vehicle platforms, sourcing to 

common suppliers for the total global volume of a vehicle’s components is dramatically 

increasing, meaning that a smaller number of suppliers will receive a greater volume of 

the purchases made by Ford to support our global vehicle platform. This again results 

Aligning Manufacturing 

capacity to meet real 

demand 

Strengthening our U.S. 

supply base 
11

in stronger suppliers achieving (and Ford realizing) greater economies of scale as their 

components are sourced across global platforms for the life of that platform. 

 Dealers. Our dealers are a source of strength, especially our rural/small town 

dealers, who represent the face of Ford in communities across the U.S. and provide 

employment, tax support, community leadership and customer service. At our current 

and expected future market share, we clearly have 

too many dealers and therefore have made it 

increasingly difficult to sustain a healthy and 

profitable dealer network. To address this 

overcapacity, we are partnering with our dealers and are downsizing and restructuring 

the Ford, Lincoln and Mercury network in our largest 130 metropolitan market areas to 

provide targeted average-year sales for Ford dealers at 1,500+ units and Lincoln 

Mercury dealers at 600+ units, resulting in sustainable profits in both good and bad 

years. We are doing this while maintaining customer convenience factors such as 

driving distance, location, and appealing facilities. We have joined with our dealers to 

fund these consolidation actions jointly to protect our representation in the marketplace. 

 At year-end 2005, we had 4,396 Ford, Lincoln, Mercury dealers, with 2,242 of 

those dealers in our largest 130 markets. By year-end 2008, we estimate that we will 

have 3,790 dealers, with 1,875 dealers in our largest 130 markets, a reduction of 606 

dealers overall (14%), 367 of which were in our largest markets (a reduction of 16%). 

We will continue to work collaboratively with our dealers to reduce our dealer network to 

match our sales, market share and dealer sales objectives. 

 Credit Operations. We also continue to support our dealers through our whollyowned subsidiary, Ford Motor Credit Company – especially important during this time of 

tight consumer and commercial access to credit. Ford Credit provides wholesale, retail 

and lease financing programs, together with capital and facility loan programs. 

Ford Credit is further consolidating its operations and 

improving its cost structure to reflect lower financing 

volumes resulting from the sale of the Jaguar and 

Land Rover brands, our reduced ownership in Mazda 

and lower automotive industry sales volumes. These

actions include forming new strategic alliances and partnerships and reducing capital 

needs in international markets, and continuing to restructure its operations globally. 

Supporting our dealer 

network

Focusing Ford Motor 

Credit Company to 

support U.S. dealers and 

consumers 
12

 Salaried Personnel. In the area of salaried personnel, we are engaging in 

aggressive restructuring to fit our business to the current demand and to set the stage 

for growth. We will have reduced salaried personnel costs by 40% over the past three 

years, including a 10% reduction effective February 2009. In addition, since 2005, we 

have reduced the number of corporate vice presidents in North America by 35%. 

To further reduce costs, we recently made several 

significant changes to our Compensation and Benefit plans, 

including: (i) eliminating merit increases and bonuses due 

to be paid in 2009; (ii) suspending the Company’s 401(k) 

matching contribution, and Company-paid tuition assistance and dependent 

scholarships; (iii) capping retiree life insurance at $25,000; and (iv) improving the costeffectiveness of benefit programs through more efficient plan offerings and increased 

employee cost sharing. (See Appendix, Slide 1.) 

 Hourly Personnel. With respect to the hourly work force in the United States, we 

and the UAW agreed to a transformational labor agreement in 2007, the benefits of 

which are only beginning to be realized. Under this agreement, our hourly labor cost 

disadvantage compared to the transplants will be substantially reduced, although not 

completely eliminated. These labor costs savings should begin to materialize as we 

have the opportunity to bring workers into the workforce at the new wage levels. (See 

Appendix, Slide 2.) 

The 2007 UAW/Ford Negotiations resulted in 

significant progress being made in reducing the 

Company’s total labor cost. Given the present 

economic crisis and its impact upon the automotive 

industry, however, Ford is presently engaged in 

discussions with the UAW with the objective to further reduce our cost structure and 

eliminate the remaining labor cost gap that exists between Ford and the transplants. 

 As the Committees are aware, Ford is a significant provider of health care 

coverage in the United States, providing expansive health care benefits to nearly 

500,000 current and retired employees, including their dependents. In our 2007 

agreement with the UAW, we agreed to help ensure the coverage for current and future 

UAW retirees by paying $13.2 billion in the form of cash and notes into a Voluntary 

Employee Beneficiary Association trust (“VEBA”) to settle the Company’s obligation, 

effective at year-end 2009. We intend to fully meet the terms of our agreement with the 

UAW to transfer the assets and the notes by December 31, 2009. 

 In the area of health care for salaried employees, our obligation at year-end 2007 

was $2 billion. We have implemented cost caps on these benefits beginning in 2007, 

which will limit our exposure to future cost increases. In addition, we continue to drive 

efficiencies for all participants through wellness education programs and competitive 

benefit sourcing. 

Reducing salaried 

personnel costs 

Working with the UAW to 

transform our hourly 

personnel cost structure 
13

 As a result of the above actions, we will realize a total of $5.5 billion in 

annualized operating cost reductions from 2005 through 2008. We continue to pursue 

additional cost reductions at all levels for 2009 and future years, and we expect an 

additional $1 billion in operating cost reductions in 2009. 

 

II. Accelerate development of new products our customers want 

 and value 

Success in the automotive business is based on 

product. No element of our Plan is more 

important than accelerating the development of 

new vehicles our customers want and value. 

We will achieve this through: 

• A balanced and complete portfolio of small, medium and large vehicles in the car, 

utility and truck segments facilitated by using Ford’s world class vehicles 

available in all of our regions; 

• Product excellence through leadership in fuel economy, innovation, quality, 

safety, and leading edge “comfort and convenience” technology; 

• Substantial and continuous improvement in engineering and investment 

efficiency facilitated by leveraging the global assets of “One Ford” and a 

reduction in the number of vehicle platforms, engines, transmissions, and 

customer offered complexity; and 

• Significant improvement in the profitability of small cars. 

 Balanced Portfolio. We are leveraging our global product strengths to deliver six 

new world-class small and medium sized vehicles to the United States over the next 

four years. This will enable our car and crossover product segment mix to increase 

from 48% to 60% and result in volume and share growth. (See Appendix, Slide 3.) We 

are targeting sales leadership in “people movers” and crossovers through addition of 

new vehicles (such as the Ford Flex) and redefining existing vehicles (such as the Ford 

Explorer). We will have significantly reduced 

truck, van, & sport utility vehicle (SUV) product 

mix from 52% to 40% in only three years. In 

order to realize a balanced portfolio, we are 

increasing our investment allocation in cars and 

crossovers from 59% to 82% of our total 

investment. 

 Although we believe that the shift to smaller, more fuel-efficient vehicles is 

permanent, trucks, vans and SUVs will continue to be an important part of the North 

American market. We intend to maintain our leadership position in these segments by 

focusing our investment on new fuel-efficient vehicles, such as the new Ford Transit, 

and all new powertrains with advanced technology. 

No element of our One Ford 

Plan is more important than 

accelerating the development 

of new vehicles our customers 

want and value. 

Ford is recognizing and 

adapting to the shift to smaller 

vehicles while maintaining 

leadership in our areas of 

traditional strength. 
14

 Product Excellence and Innovation. Ford Motor Company understands the 

importance of fuel economy to both our customers and the Nation and we are 

committed to deliver the best or among the best fuel economy with every new vehicle. 

In fact, half of our Ford, Lincoln and 

Mercury light duty nameplates qualify by 

2010 as “Advanced Technology Vehicles” 

under the Energy Independence and 

Security Act– increasing to 75 percent in 

2011 and more than 90 percent in 2014. 

As part of our commitment to be America’s 

fuel-economy leader, we will: 

• Improve Ford’s U.S. light-duty vehicle fleet fuel economy from the 2005 model 

year baseline every year. From Ford’s largest light duty trucks to our smallest 

cars, we will improve the fuel economy of our fleet by 14% in 2009, 26% in 2012, 

and 36% in 2015. We fully intend to meet or exceed the fuel efficiency 

requirements set forth in the Energy Independence and Security Act of 2007. 

• Deploy affordable fuel economy technologies in high volume for all customers, 

including : 

 EcoBoost Engines (turbo-charging plus direct injection combined with 

downsizing – with up to a 20% improvement in fuel economy) – following 

introduction in 2009, application of this technology will increase to more than 

85% of Ford/Lincoln/Mercury nameplates by 2012 and 95% by 2015 

 Electric Power Assisted Steering – will be available on 90% of 

Ford/Lincoln/Mercury nameplates by 2012 and 100% by 2014. Electric 

steering improves fuel economy by 3%, and is just one example of the 

attention-to-detail necessary to deliver fuel economy leadership 

 6-Speed Transmissions – currently offered in more volume than any other 

manufacturer. 6-speed transmissions will be in 100% of 

Ford/Lincoln/Mercury nameplates by 2012 

• Support bio-fuels such as ethanol as an important long term solution to our 

energy needs, especially as second generation fuels become available. Ford 

has committed to doubling the production of flexible fuel vehicles by 2010 and to 

producing 50% of our products capable of running on E85 by 2012. In addition, 

we are operating demonstration fleets of hybrid and plug-in hybrid vehicles 

capable of running on E85. 

• Continue to develop and deploy hybrids while reducing cost for expanded market 

applications. Ford was the first U.S. company to introduce a hybrid with the 

introduction of the Ford Escape Hybrid in 2004 and the Escape and Mariner 

Hybrids remain the fuel-economy leaders among all sport utilities. Full HEV 

nameplate offerings and volume will double in 2009 with introduction of Ford 

Fusion and Mercury Milan Hybrids, which best the Toyota Camry hybrid by at 

least six mpg. 

Ford is delivering dramatic 

improvements in fuel economy, 

and investing $14 billion in the 

U.S. on advanced technologies. 
15

• Achieve annual fuel savings of 2.5 billion gallons by 2012 model year and 3.1 

billion gallons by 2015 model year from new fuel efficient vehicles including: 

 2009 Ford Escape with better highway fuel economy than Toyota RAV4 

and Honda CRV. 

 2009 Ford F-150 with class-leading fuel economy better than Toyota 

Tundra and Nissan Titan. 

 2010 Ford Fusion HEV with better fuel economy than Toyota Camry HEV 

by at least 6 mpg. 

 2010 Ford Fusion with better highway fuel economy than Toyota Camry 

and Honda Accord. 

 2011 Ford Explorer with better highway fuel economy than Toyota 

Highlander HEV. 

 2011 Ford Fiesta with better highway fuel economy than Toyota Yaris and 

Nissan Versa. 

• Achieve cumulative gasoline fuel savings from Ford’s advanced technology 

vehicles of 16 billion gallons from 2005-2015. 

 Our Plan calls for an investment of roughly $14 billion in the U.S. on advance 

technologies to improve fuel efficiency by over 25%. We have submitted these projects 

to DOE under Section 136 of the Energy Independence and Security Act, and expect to 

receive $5 billion in direct loans by 2011 to invest in these technologies. 

 In addition to fuel economy leadership, we intend to achieve leadership in quality 

and maintain leadership in public domain safety testing and interior comfort and 

convenience technology, and we are well on our way. 

The 2008 model year marked Ford’s fourth 

consecutive year of improved vehicle quality: 

• Customer concerns at both high and low times in service dropped by 50% in the 

last four years; contributing more than $1 billion in warranty savings to date. 

Plans are in place to achieve another 30% improvement by 2011. 

• Ford led the domestic manufacturers in the 2008 Consumer Reports Reliability 

Survey, with the most reliable gas family cars being the Ford Fusion and Mercury 

Milan. 

• Ford and Mercury are among top four non-luxury brands with Toyota and Honda 

at 3 Years in Service in the 2008 RDA Global Quality Research Survey (GQRS), 

a respected third party assessment of industry quality. 

• Ford, Lincoln and Mercury tied the best Japanese brands in the 2008 RDA 

GQRS survey at 3 months in service. 

• Ford and Mercury are among the top four non-luxury brands with Toyota and 

Honda in JD Power & Associates Initial Quality Study (IQS). 

• We have increased Consumer Reports “Recommended Buys” from 11 in 2005 to 

16 in 2008, and we have plans in place for all Ford vehicles to achieve 

Recommended Buys by 2011. 

Ford is leading in quality, 

safety, and technology. 
16

 Ford continues as a leader in safety performance. We recently achieved the 

highest number of “Top Safety Picks” from the U.S. Insurance Institute for Highway 

Safety (IIHS), we were awarded the most U.S. government 5-star safety ratings in the 

automotive industry, and we have introduced product innovations that improve safety 

including: (i) Forward Collision Warning with Brake Support; (ii) Blind Spot Information 

System with Cross Traffic Alert; (iii) Roll Stability Control; (iv) MyKey© configurable 

driving mode to encourage safer driving behaviors; and (v) Integrated Spotter Mirror. 

We also continue to lead on technologies that enhance comfort and convenience, 

including SYNC for hands-free media and phone, Easy Fuel capless fuel filler and our 

coming innovation in next generation display and information systems. 

 Sustainability and Electrification Strategy. Ford’s sustainability plan will achieve 

continuous and substantial improvement in fuel economy and a corresponding reduction 

in CO2 through affordable technology in high volume. Ford’s plan is to make affordable 

fuel efficiency available to millions of consumers.

Our three-phased approach – with near-term, 

medium-term and long-term advanced 

technologies and products – begins now with 

advanced internal combustion engine and 

transmission technologies, such as our 

EcoBoost engines going into production on 

several vehicles in 2009. The next major step in 

Ford’s plan is to increase over time the volume 

of electrified vehicles, as battery costs improve 

and as the transition from Hybrids to Plug-in 

Hybrids to Battery Electric Vehicles occurs. (See Appendix, Slide 4.) 

Next month at the North American International Auto Show in Detroit, we will 

discuss in detail Ford’s accelerated vehicle electrification plan, which includes bringing 

to market by 2012 a family of hybrids, plug-in hybrids and battery electric vehicles. Our 

work will include partnering with battery and powertrain systems suppliers to deliver a 

full battery electric vehicle (BEV) in a van-type vehicle for commercial fleet use in 2010 

and a BEV sedan in 2011. We will develop these vehicles in a manner that enables us 

to reduce costs and ultimately makes battery electric powered vehicles more affordable 

for consumers. 

Our plan also includes building on our competence in hybrid vehicles, as 

demonstrated by the industry-leading fuel economy of the Ford Escape and Ford Fusion 

hybrids. We are now developing our next generation full hybrid technology, which 

includes plug-in capability, for vehicles in 2012 and beyond. We are targeting a 

substantial increase in hybrid volume through a greater than 30% reduction in cost, 

installation of hybrid capability in global platforms and hybrid vehicles that are uniquely 

styled. 

Ford’s three-phased approach 

to sustainability provides 

immediate and significant 

improvements on a wide scale 

and accelerated electrification, 

including next generation 

hybrids and all-electric 

vehicles.
17

 We cannot, however, accomplish significant electrification by ourselves. The 

2007 Energy Independence and Security Act requires American-developed 

breakthroughs in high-power energy batteries (e.g. 

lithium ion). In order to make significant progress in 

electrification, Ford supports establishing a U.S. 

public/private partnership to accelerate the 

development of this capability, including supporting 

infrastructure, within the United States. 

 Engineering and Investment Efficiency. As part of our Plan, we are providing 

more new or significantly changed vehicles for our customers with less investment. 

Between 2005 and 2008, we improved our engineering costs and facilities and tooling 

costs for a new vehicle by 60% and 40%, respectively. Continuation of these rates of 

improvement is included in our business plan. Major enablers to these improvements 

include: 

• A new Product Development process learned from our partner, Mazda, that 

reduces the time to develop a new vehicle by 8 to 14 months 

• Continuing focus on simplification, for example, the reduction of vehicle platforms 

(the underpinnings of a vehicle) from 25 in 2005 to 9 by 2012, equal to the best 

competitor. 

 Small Car Profitability. As part of our Plan, we will reverse the decades-long 

trend of losing money on the production of small cars in the United States. In order to 

accomplish this improvement in profitability, 

and secure our ability to continue to produce all 

types of vehicles in the U.S., we are taking the 

following actions: 

• Increase global platform volume of Focus sized vehicles to over 2 million units 

per year; 

• Increase volume of Ford Focus cars to over 1 million units per year; 

• Improve margins by: 

 improving revenues by making vehicles that are exciting in design, both 

exterior and interior, with class-leading fuel economy, safety performance, 

craftsmanship, and technology. The improvements across all Ford 

vehicles are improving customer perception of the Ford brand; 

 improving costs to competitive levels through reduced complexity and 

global purchasing scale; and 

• Improve fixed costs through increased manufacturing and supply base capacity 

utilization and sharing of engineering and tooling costs globally. 

Ford is taking action to make 

production of small cars 

profitable in the U.S. 

Ford supports a 

public/private partnership to 

develop next generation 

battery technology 
18

III. Finance our plan and improve our balance sheet 

 The third pillar of our Plan is to finance the Plan and improve our balance sheet. 

As noted, we worked to obtain financing for our Plan by going to the markets in 

December 2006 to raise $23.5 billion in liquidity, consisting of $18.5 billion of senior 

secured debt and credit facilities, secured by substantially all of our domestic assets, 

and $5 billion of convertible debt. 

 In addition, in 2006, we eliminated common stock dividends and in 2007 and 

2008 we issued more than $3 billion in new equity (debt exchanges and direct 

issuances), sold Aston Martin, Jaguar, Land Rover and the majority of our investment in 

Mazda. 

 At Ford Credit, and in light of the frozen capital markets, we have recently 

become more reliant on committed securitization capacity from banks and have 

embarked upon aggressive plans to develop new funding products. We are eligible for 

and are participating in funding programs from the European Central Bank and, more 

recently, the Federal Reserve’s Commercial Paper Funding Facility (CPFF). We have 

provided feedback to the Federal Reserve and Treasury on their newest program (Term 

Asset Backed Securities Loan Facility) in hopes that changes can be implemented that, 

in our view, will result in better financing support for our U.S. customers and dealers. 

We also filed an Industrial Loan Company application with the FDIC earlier this year and 

we are hopeful that a favorable response will soon be forthcoming so we can diversify 

our funding capability and eliminate the competitive disadvantage created by certain 

competitors operating Industrial Loan Companies. 

 Looking forward to 2009 and beyond, we intend to explore strategic alternatives 

for our Volvo business, including divestiture. We also intend to raise further equity 

capital when markets re-open and our business begins to improve, and we would 

explore balance sheet restructuring over time. 

IV. Work together effectively as one team 

As part of the One Team approach, we have implemented a disciplined business 

plan process to regularly review our business environment, risks and opportunities, our 

strategy, our Plan, and identify areas of our Plan that need special attention and pursue 

opportunities to improve our Plan. Everyone is included and contributes, openness is 

encouraged, our leaders are responsible and accountable, we use facts and data to 

make our decisions, high performance teamwork is a performance criteria and we follow 

this process every week, every month, and every quarter, driving continuous 

improvement. We believe this process gives us a clear picture of our business in real 

time and the ability to respond quickly to new issues and changing conditions – as we 

have done in the face of rapid changes in the market and business environment in 2008. 
19

 In addition, we are partnering with and enlisting all of our stakeholders to help us 

execute our Plan to deal with our business realities and create an exciting viable Ford 

business going forward. We are reaching out and listening to customers, dealers, 

employees, the UAW, suppliers, investors, communities, retirees, and federal, state and 

local governments. Each of these constituencies is a critical part of, and critical to, the 

success of our business going forward. Realizing our goal of profitable growth for all is 

as important to these stakeholders as it is to our shareholders. 

 Implementing the elements of our Plan in North America will deliver a viable and 

profitable business, poised for profitable growth for all. Under our Plan we expect our 

profitability (operating profit before taxes – excluding special items) to be at or above 

breakeven for both Corporate and North American Automotive in 2011 and our 

Corporate operating cash flow to be at or above breakeven in 2011. 

SUMMARY

 Ford Motor Company has a comprehensive transformational Plan that will 

ensure our future viability – as evidence by our profitability in the first quarter of 2008. 

Ford’s overseas operations are profitable, and we have put in place the same productled transformation plan and business model to ensure our viability in the U.S. Ford has 

enough liquidity in the near-term and a plan to be profitable in the long-term based on 

our present assumptions, which we believe are firmly grounded in reality. We are 

poised for profitable growth for all of our stakeholders – our employees, suppliers, 

dealers, shareholders and the communities across America that benefit from our 

presence and our success. 

Responses to specific questions in the letter from Speaker of the House Pelosi and 

Majority Leader Reid are on the pages that follow. 
20

RESPONSE TO SPECIFIC QUESTIONS

 We have presented the key elements of Ford Motor Company’s Plan to achieve 

profitability, and will answer the specific questions in the letter from Speaker Pelosi and 

Majority Leader Reid. We believe that these responses should be the beginning of a 

partnership between the Federal Government and the industry as part of the provision 

of the proposed bridge loans to the industry. 

 We hope that the 111th Congress and the incoming Obama Administration will 

establish a process to address in a comprehensive way the conditions that inhibit 

competitiveness of the domestic industry and that the process will include all of the 

stakeholders – manufacturers, creditors, dealers, the United Auto Workers, and 

suppliers, to enhance the long term strength of the industry. 

Provide a forthright, documented assessment of the auto companies’ 

current operating cash position, short-term liquidity needs to continue 

operations as a going-concern, and how they will meet the financing needs 

associated with the plan to ensure the companies’ long-term viability as 

they retool for the future. 

As of September 30, Ford had about $30 billion of liquidity ($19 billion of cash 

and $11 billion of available automotive credit lines). 

We also are implementing a series of operating and financing actions that are 

expected to improve Automotive cash by a total of $14 billion to $17 billion 

through 2010. These actions include: 

• Reducing our 2009-2010 annual capital spending to between $5.0 and $5.5 

billion; 

• Achieving further salaried personnel-related cost reductions through 

personnel reductions and revisions to compensation; 

• Reducing engineering and manufacturing costs through improved 

efficiencies and alignment with volume assumptions; 

• Reducing other structural costs through greater efficiencies in 

advertising, information technology, and other areas 

• Reducing inventories globally and achieving other working 

capital improvements; 

• Releasing capital consistent with Ford Credit’s smaller balance sheet 

and focus on core Ford brands; 

• Developing incremental sources of funding, including sale of non-core assets; 

and 

• Implementing equity for debt swaps. 

Because of these actions and our access to our revolving credit lines, even if 

industry levels were somewhat worse than October 2008 levels through the end 
21

of 2009, Ford would have adequate short-term liquidity. Drawing the credit lines, 

however, would put significant financial pressure on an already stressed banking 

sector. The revolver loan would be required to be paid back or refinanced, if 

markets permit, by year-end 2011. 

Ford, therefore, is not facing a short-term liquidity issue but this could change if 

there is a significant industry event that causes a disruption to our supply base 

and creditors 

The continuing decline in the economic environment also has caused longer-term 

issues for our plan, which we address in the next section. 
22

Provide varying estimates of the terms of the loan requested with varying 

assumptions including that of automobile sales at current rates, at slightly 

improved rates, and at worse rates. 

We have set forth below our estimates of U.S. new vehicle sales at slightly 

improved rates, at current rates, and at worst rates. Our request for government 

funding in the form of a “stand-by” line of credit, in the amount of up to $9 billion, 

is based on our analysis of automobile sales at current rates. 

Automotive Industry Sales at “Slightly Improved Rates”

These are the assumptions on which our Plan is based and which are supported 

by modeling recoveries from past deep recessions. 

 2009 2010 2011

U.S. Total Vehicle Sales (mils.)* 12.5 14.5 15.5

*includes medium and heavy duty trucks 

This forecast is based on an economic cycle similar to the early 1980’s with a 

peak-to-trough real GDP decline of 2 to 2.5%. Overall, our GDP assumptions are 

generally consistent with the ranges released by the Federal Reserve on 

November 18, 2008. This vehicle sales forecast includes four years of 

consecutive declines in vehicle ownership (per driving age person), the longest 

reversal of this trend. Total sales remain 10-15% below trend in 2010. We 

believe that the enactment of a successful stimulus package has the potential to 

generate demand in excess of this forecast. 

Based on this forecast, we have sufficient resources through the business plan 

period to fund our substantial investment in product and fuel economy 

improvement plans and maintain our VEBA funding plans. The recent declines in 

the stock market, however, have reduced our U.S. pension funding levels. Based 

on the average rate of return that we expect to realize longer term as opposed to 

returns that have historically been realized coming out of a recession, this would 

require additional contributions of $3-$4 billion starting in 2010. In addition, the 

continuing uncertainty in the credit markets jeopardizes our funding plans for our 

credit company; requiring up to $4 billion of incremental capital to replace debt 

that we presently can not raise. Further, given the increasing uncertainty of the 

economic environment, we believe it would be prudent to plan for an additional 

$2-$3 billion for balance sheet restructuring or for further industry declines (equal 

to a decline in industry volumes by about 2-3 million units over the 2009-2011 

planning period -- the sensitivity of our cash to changes in industry volume is 

about $1 billion per 1 million change in unit volume). 

Based on the substantial fuel economy investments included in our plan, we 

expect to receive up to $5 billion of DoE funds through 2011 based on the full 

amount requested as part of our November 11, 2008 submission. Assuming this 
23

level of DoE funding, availability of incremental funds of up to $4-$6 billion 

through 2011 would be required to provide protection against the above issues. 

If our Plan were to materialize, we believe we would only need a government 

credit line of $6 billion, again only to be accessed if and to the extent needed. 

Automotive Industry Sales at “Current Rates”

 2009 2010 2011

U.S. Total Vehicle Sales (mils.) 11.0 12.5 14.0

This forecast is based on an economic cycle worse than the early 1980’s and a 

recession that persists through all of 2009. The peak-to-trough real GDP decline 

would be about 3%. In this scenario, the median age of cars would rise to well 

above 10 years (up from only 8 years earlier this decade) as consumers stop 

replacing vehicles. The cumulative reduction of 5 million industry units from our 

Plan levels would increase our funding needs to up to $9 billion. 

Automotive Industry Sales at “Worse Rates”

 2009 2010 2011

U.S. Total Vehicle Sales (mils.) 10.5 11.0 12.0

This forecast is based on prolonged economic slump that persists into 2010. In 

this case, significant monetary and fiscal policy easing does not provide any 

stimulus to consumer and business spending. The downturn would be the worst 

on record in the post depression period. The cumulative reduction of 9 million 

industry units would increase our funding needs to up to $13 billion. 

The incremental funding under these scenarios would cover working capital 

requirements and additional restructuring actions (including personnel layoffs and 

plant closings). 
24

Provide for specific measures designed to ensure transparency and 

accountability, including regular reporting to, and information-sharing with, 

any federal government oversight mechanisms established to safeguard 

taxpayer investments. 

Ford hopes it will not need to utilize these loans, but if we do we would provide 

significant information regarding our business to any Oversight Board that 

Congress might establish. 

Ford regularly provides financial and other information in publicly-filed reports to 

SEC, NHTSA, EPA, and PBGC. In addition to our publicly-filed reports, we would 

submit periodically to any Oversight Board information on: 

• our progress, and projected future progress, in meeting the performance 

goals and milestones of our plan; 

• our progress in improving our capacity to pursue the timely and aggressive 

production of energy-efficient advanced technology vehicles and in meeting 

federal fuel efficiency requirements; 

• our executive compensation plans (to demonstrate compliance with the 

provisions of the legislation); 

• our progress in preserving and promoting U.S. auto jobs, [consistent with our 

plan for financial viability]; 

• funding of retirement and health care benefits for our retirees and their 

dependents; and 

• our efforts to strengthen our balance sheet over time to reduce our debt and 

repay any government loans 

In order to allow these reports to be as inclusive as possible, we strongly 

recommend that Congress afford the opportunity where appropriate for information 

submitted to the Oversight Board to be protected from public disclosure as 

confidential business information. 
25

Protect taxpayers by granting the most senior status for any government 

loans provided, ensuring that taxpayers get paid back first. 

We recognize the importance of the federal government protecting the taxpayers’ 

interests in connection with any loans made to the automakers. Senior status of 

government loans could, however, exacerbate our challenges and the problems in 

the financial system by causing certain existing debt to be in default. Ford has $17.5 

billion of senior secured debt, including $10.2 billion of available credit facilities, 

secured by substantially all of our domestic assets. It is this liquidity that we believe 

may permit us to make it through this difficult period without needing to avail 

ourselves of government financial assistance. Ford also has outstanding $17.1 

billion of publicly-issued unsecured debt securities that by their terms rank as senior

unsecured debt. 

A condition of senior status for any government loan could cause lenders or holders 

of our debt to allege a debt default, which could result in an acceleration of 

indebtedness and lead to the very result the legislation was designed to prevent, 

namely, a liquidity crises. 

Any legislation, therefore, should be structured to provide that any government loans 

would be given priority over “unsecured obligations and indebtedness of the 

borrower, except to the extent that creating such priority would cause those 

obligations or indebtedness to be in default.” We would be pleased to discuss this 

matter further with the Committees should that prove helpful to a better 

understanding of the difficulties presented by the proposal to grant taxpayers the 

“most senior status.” 
26

Assure that taxpayers benefit as corporate conditions improve and 

shareholder value increases through the provision of warrants or 

other mechanisms. 

Ford supports the need for taxpayer protections. Should business conditions 

worsen and we need to use the loans, Ford will work with the Federal Government 

to implement reasonable provisions of warrants or other forms of support. 

We respectfully recommend that a reasonable coverage ratio for warrants would be 

15%, the level applied to TARP participants, with the strike price and numbers of 

shares of common stock determined by reference to the market price of Ford stock 

at the time of drawing on the bridge loan. Existing Ford shareholders, of course, 

would be diluted. 

 

In order to protect valuable tax losses, it is important that the equity interests 

provided to the Federal Government not contribute to an ownership change under 

Internal Revenue Code section 382. The necessary provisions would be similar to 

the section 382 protections provided to banks by IRS Notice 2008-100 with respect 

to the equity interests provided to the Federal Government under the Capital 

Purchase Program of the Emergency Economic Stabilization Act of 2008, P.L. 110-

343.

 
27

Bar the payment of dividends and excessive executive compensation, 

including bonuses and golden parachutes by companies receiving 

taxpayer assistance. 

Ford is taking aggressive actions to limit dividends and executive compensation 

during this difficult period. Ford eliminated dividends to shareholders in 2006. In 

the event Ford receives help under this legislation being contemplated by Congress, 

we would not resume paying dividends until after such assistance has been repaid. 

Ford recognizes that transforming our industry will require the shared sacrifice of 

many stakeholders and we will be asking our employees, dealers, and others to 

make changes to help save their jobs and our company. To underscore our 

commitment, Ford’s senior executives will not receive any salary increases or 

bonuses in 2009, and we will extend that restriction if business conditions continue 

to warrant it. We believe that the executive compensation limits imposed under 

TARP (to which we may be availing ourselves even without bridge loans if the TALF 

program is implemented so that our credit operations can participate and benefit 

from this program) are equally appropriate for the automobile industry. 

In order to innovate and develop the smaller and more fuel efficient cars of the 

future, we also need to attract and retain highly skilled employees. As it considers 

legislation, we hope that Congress will provide us with adequate flexibility to attract 

and keep the quality employees essential to our transformation and not impose 

overly broad restrictions that will inhibit our competitiveness. 
28

Include proposals to address the payment of healthcare and pension 

obligations. 

As stated in our submission, Ford is a significant provider of health care coverage in 

the United States, providing expansive health care coverage current and retired 

employees and their dependents –covering over 500,000 people in total. In our 

agreement with the UAW, we agreed to help ensure the coverage for current and 

future UAW retirees by paying $13.2 billion in the form of cash and notes into a 

Voluntary Employee Beneficiary Association trust (“VEBA”) to fully settle the 

Company’s obligation, effective at year-end 2009. We intend to fully meet the terms 

of our agreement with the UAW to transfer the assets and the notes by December 

31, 2009. 

In the area of salaried health care, our obligation at year-end 2007 was $2 billion. 

We have implemented cost caps on salaried benefits beginning in 2007, which will 

limit our exposure to future cost increases. In addition, we continue to drive 

efficiencies for all participants through wellness education programs and competitive 

benefit sourcing. The funding of our salaried health care obligations in included as 

part of our Plan. 

The Company provides substantial retirement benefits to both hourly and salaried 

U.S. retirees – 207,000 UAW retirees and 128,000 salaried retirees. At the end of 

2007, our hourly and salaried pension plans were funded at levels of 104% and 

111%, respectively, with combined assets of $45.8 billion. Stock market declines, 

however, have resulted in a significant, unexpected reduction in the funded status of 

U.S. pension plans, so that without an improvement in market conditions, required 

contributions to our major U.S. pension plans are expected beginning in 2010 – with 

a total of about $3-4 billion in contributions starting in 2010. 

Should pension investment returns not recover, or continue to deteriorate, 

government loans could be used to ensure the overall strong funding status of our 

pension plans. 
29

Demonstrate the auto companies’ ability to achieve the fuel efficiency 

requirements set forth in the Energy Independence and Security Act of 2007, 

and become a long-term global leader in the production of energy-efficient 

advanced technology vehicles. 

Ford Motor Company understands the importance of fuel economy to both our 

customers and the Nation and we are committed to deliver the best or among the 

best fuel economy with every new vehicle. In fact, half of our Ford, Lincoln and 

Mercury light duty nameplates qualify as “Advanced Technology Vehicles” under the 

Energy Independence and Security Act by 2010 – increasing to 75 percent in 2011 

and more than 90 percent in 2014. As part of our commitment to be America’s fueleconomy leader, we will: 

• Improve Ford’s U.S. light-duty vehicle fleet fuel economy from the 2005 model 

year baseline every year. From Ford’s largest light duty trucks to our smallest 

cars, we will improve the fuel economy of our fleet by 14% in 2009, 26% in 2012, 

and 36% in 2015. We fully intend to meet or exceed the fuel efficiency 

requirements set forth in the Energy Independence and Security Act of 2007. 

• Deploy affordable fuel economy technologies in high volume for all customers, 

including : 

 EcoBoost Engines (turbo-charging plus direct injection combined with 

downsizing – with up to a 20% improvement in fuel economy) – following 

introduction in 2009, application of this technology will increase to more 

than 85% of Ford/Lincoln/Mercury nameplates by 2012 and 95% by 2015 

 Electric Power Assisted Steering – will be available on 90% of 

Ford/Lincoln/Mercury nameplates by 2012 and 100% by 2014. Electric 

steering improves fuel economy by 3%, and is just one example of the 

attention-to-detail necessary to deliver fuel economy leadership 

 6-Speed Transmissions – currently offered in more volume than any other 

manufacturer. 6-speed transmissions will be in 100% of 

Ford/Lincoln/Mercury nameplates by 2012 

• Support bio-fuels such as ethanol as an important long term solution to our 

energy needs, especially as second generation fuels become available. Ford 

has committed to doubling the production of flexible fuel vehicles by 2010 and to 

producing 50% of our products capable of running on E85 by 2012. In addition, 

we have produced demonstration fleets of hybrid and plug-in hybrid vehicles 

capable of running on E85. 

• Continue to develop and deploy Hybrids while reducing cost for expanded market 

applications. Ford was the first U.S. company to introduce a hybrid with the 

introduction of the Ford Escape Hybrid in 2004 and the Escape and Mariner 

Hybrids remain the fuel-economy leaders among all sport utilities. Full HEV 

nameplate offerings and volume will double in 2009 with introduction of Fusion 

and Milan Hybrids, which best the Toyota Camry hybrid by at least six mpg. 

• Achieve annual fuel savings of 2.5 billion gallons by 2012 model year and 3.1 

billion gallons by 2015 model year from new fuel efficient vehicles including: 
30

 2009 Ford Escape with better highway fuel economy than Toyota RAV4 

and Honda CRV. 

 2009 Ford F150 with class leading fuel economy better than Toyota 

Tundra and Nissan Titan. 

 2010 Ford Fusion HEV with better fuel economy than Toyota Camry HEV 

by at least 6 mpg. 

 2010 Ford Fusion with better highway fuel economy than Toyota Camry 

and Honda Accord. 

 2011 Ford Explorer with better highway fuel economy than Toyota 

Highlander HEV. 

 2011 Ford Fiesta with better highway fuel economy than Toyota Yaris and 

Nissan Versa. 

• Achieve cumulative gasoline fuel savings from Ford’s advanced technology 

vehicles of 16 billion gallons from 2005-2015. 

Our plan calls for an investment of roughly $14 billion in the U.S. on advance 

technologies to improve fuel efficiency by over 25%. We have submitted these 

projects to DoE under Section 136 of the Energy Independence and Security Act, 

and expect to receive $5 billion in direct loans by 2011 to invest in these 

technologies. 
31

Require that government loans be immediately callable if long-term plan 

benchmarks are not met. 

Should business conditions worsen, and we needed to avail ourselves of 

government financing, we would accept a callable structure if sufficient flexibility was 

provided to address unforeseen events that might lead to deviation from any loan 

requirements. 
32

APPENDIX