福特汽車 (F) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to either those of you who are here with us in Dearborn or those who are joining us via the telephone or the webcast. I am Barbara Gasper, Vice President of Investor Relations for Ford Motor Company and on behalf of the entire Ford management team, I would like to thank you for spending time with us this morning, especially those of you who traveled to be here today in person.

We will first provide a review of our 2005 financial results and then later this morning, we will present our business outlook, including the details of the "Way Forward" plan. Copies of this morning's earnings release and the slide deck that we will be using in this first presentation have been posted on Ford's investor and media website for your reference. The materials for our business outlook presentation will be available shortly before that presentation begins at 10.30.

In just a minute, Don Leclair, our Chief Financial Officer, will discuss our fourth-quarter and full year 2005 financial results. Other members of the management team here in the room this morning are Jim Gouin, Controller; Ann Marie Petach, Treasurer; Patricia Little, Director of Accounting and Dave Cosper, Ford Credit's CFO.

Please note that the financial results presented here are on a GAAP basis and in some cases on a non-GAAP basis. Any non-GAAP financial measures discussed on this call are reconciled to their GAAP equivalent as part of the appendix to our slide deck.

Just a few administrative details to get out of the way before we get started. First, this room provides us with the ability to handle questions from both audience members and those of you participating remotely by phone. Instructions for queuing in by phone will be provided by the operator. We will be taking a 15 minute break at 10.15 and at that time, those of you who are here in Dearborn will need to move down the hall to the room where the business outlook presentation is taking place. Those of you joining in on the phone or the webcast can just stay on the line and be able to hear that presentation when it begins at 10.30. There is no need to reconnect.

I would also like to ask those of you here in the room to please turn off your cell phones and pagers and finally, just a reminder that today's presentation, both this financial review as well as our 10.30 business outlook session, include forward-looking statements about our expectations for Ford's future performance. Actual results could differ materially from those suggested by our comments today. Additional information about the factors that could affect future results is summarized at the end of the presentation slide deck and these risk factors are also detailed in our SEC filings.

With that, I would like to turn the program over to Don Leclair, Ford's Executive Vice President and Chief Financial Officer.

Good morning. Thanks, Barbara. As you go through this presentation this morning you will notice that some of our normal slides that provide operational details are in the appendix. We did that in the interest of time but if you have any questions I will be happy to go over those as well.

We're going to start by reviewing 2005. First off, we earned $2 billion of net income during 2005. So that is including all special charges, everything, $2 billion net income. Our pretax profits from continuing operations, excluding special items, were 3.4 billion. Our operations in Europe, South America and Asia-Pacific were profitable last year and in fact the year before. We achieved a significant improvement in PAG results during 2005 and we intend to build upon that improvement this year.

North America, however, incurred losses for the first time since 2001. Ford Credit remains solidly profitable. We took over operating control of 23 former Visteon facilities to ensure continuity of supply and improve our costs over time. We launched the Hertz sale, completed the Hertz sale, sorry, on December 21 and received the proceeds of 5.6 billion. We successfully launched the new Fusion, Milan, Zephyr midsize cars and achieved the first increase in U.S. car sales since 1999. And we also launched a major innovation initiative throughout the Company, including a commitment to a tenfold increase in hybrid production by 2010. And we took salaried-related actions and reached an agreement with the UAW to reduce our healthcare obligation and costs. And we also implemented programs to reduce overall automotive personnel by over 10,000 people during the year.

Now a couple of points here on slide 2. All of the results here include Hertz through December 21 when it was sold and it was not considered a discontinued operation because of our ongoing business relationship with Hertz. Fourth-quarter revenue of 47.6 billion and automotive sales of 41.8 were both up from 2004 and changes in exchange rates had a minimal impact on automotive revenue. Our full year revenue was about 180 billion. That's up 5% from 2004 and for the auto sector, revenue was about 155 billion, also up 5%. Of this increase, about 2% was due to exchange rates. And the fourth quarter tax rate on continuing operations, excluding special items, was 32.6% and the rate for the full year was 18.8%.

Now this slide shows the impact of special items, discontinued operations and the cumulative change in accounting principles on both our fourth-quarter and full year earnings. Income from continuing operations, excluding special items, was $0.26 per share in the fourth quarter and $1.28 per share for the full year. And special items reduced earnings by $0.06 in the fourth quarter primarily reflecting four factors.

First, as part of our year-end review process, we determined that the fair value of our long-lived assets of Jaguar Land Rover was below the book value and as a result, we took a pretax charge of 1.3 billion for impairment of Jaguar Land Rover fixed assets. And the impairment largely reflected recent market performance for Jaguar. We continued to reduce our personnel in the fourth quarter and this resulted in pretax charges of 962 million for actions implemented during the quarter. Also, the Company repatriated foreign earnings pursuant to the American Jobs Creation Act of 2004 and the Act provided the opportunity to do this at a special tax rate resulting in a permanent tax savings of about 250 million. And finally, we completed the sale of Hertz on December 21 and realized the total profit of 1.5 billion. 1.4 billion of which was recorded in the fourth quarter. This included a 1.1 billion gain on the sale and 300 million from cessation of depreciation on long-lived assets.

Largely as a result of these factors and costs associated with the Visteon related restructuring, special items reduced full year income by $0.15 a share. And income from continuing operations, including special items, was $0.20 in the fourth quarter and $1.13 for the full year. Discontinued operations had a minimal earnings effect in the fourth quarter. And as mentioned in October, our full year results also included a cumulative change in accounting principles related to asset retirement obligations. Recent accounting guidance had changed the circumstances and timing when companies must accrue future costs for environmental obligations. Essentially the new accounting pulls forward potential future asset retirement liabilities and accordingly, we have recorded an after-tax charge of about 250 million related to the estimated cost of asbestos and PCB removal. And so net income, including special items, discontinued operations and the cumulative change in accounting principles, was $0.08 a share in the quarter and $1.04 for the full year.

Now this slide shows pretax results by sector for the fourth quarter and the full year, excluding special items. Total Company pretax earnings were 869 million in the fourth quarter, 338 million better than 2004. This includes a pretax loss of 12 million on the auto side and that is 458 million better than a year ago. And pretax profit from financial services of 881 million, a decline of 120 million compared with a year ago.

This slide shows the impact of the most significant operating factors on our full year automotive earnings. As I mentioned on the previous slide, the full year automotive pretax loss was 1 billion and that is 1.9 billion down from last year. Compared with 2004, volume and mix was about 1 billion unfavorable. This is more than explained by lower marketshares primarily in North America and at Jaguar and lower dealer inventories in North America. This was partly offset by net improvement at other operations, namely Land Rover.

Net pricing was favorable by 900 million primarily reflecting improvements in Land Rover, South America and Mexico. Cost performance was unfavorable by 1.3 billion. We'll cover that in a bit more detail later. The impact of exchange was 600 million negative reflecting primarily the continued impact of a somewhat weaker U.S. dollar compared with a year ago and the expiration of favorable hedges that we put in place several years ago. And other factors were favorable by 100 million primarily improved profits related to Mazda. In sum of the memo, fourth-quarter pretax profits were about breakeven, an improvement of 500 million compared with 2004.

Our cost performance for 2005 was 1.3 billion unfavorable. However, costs improved by about 400 million during the fourth quarter and you can see that in the memo at the bottom of the slide. Quality-related expenses were unfavorable by 400 million for the year but were 100 million favorable during the fourth quarter. Manufacturing and engineering costs were 900 million favorable reflecting the ongoing improvements in our plants and processes and overhead costs were reduced by 300 million primarily reflecting reductions in salaried personnel. And essentially all of this reduction occurred in the fourth quarter.

Net product costs were $1 billion higher versus last year and the increase includes the impact of our new product program as well as higher commodity prices, as we have discussed with you before. During the fourth quarter, however, net product costs were 200 million favorable compared with a year ago. Depreciation and amortization increased by about 300 million and the fourth-quarter increase included acceleration of depreciation in a number of our operations. And pension and retiree healthcare expenses were about 800 million higher during 2005 primarily reflecting the effect of lower discount rates.

This slide shows our pretax results for the fourth quarter for each of our operating activities and in the far lower left you can see we were 458 million better than a year ago. In the fourth quarter, North America had a pretax loss of 143 million. That is 327 million better than 2004 and that improvement primarily reflected cost reductions and favorable net pricing. South America, Europe and PAG all were profitable in the fourth quarter and reported improved results compared with a year ago. Asia-Pacific and Africa lost 39 million. That's 26 million worse than 2004 and the change reflects primarily the deterioration of results in Ford Australia because of lower volumes and unfavorable mix.

Mazda and associated operations had a profit of 32 million for the quarter. That is 41 million better than a year ago and the improvement primarily reflects the gains in our investment in Mazda's convertible bonds and improved operating results at Mazda. Other automotive was a loss of 102 million. That is 404 million unfavorable compared with 2004 and that decline reflects the nonrecurrence of favorable tax-related interest in the fourth quarter of 2004.

This slide shows our pretax results by operation for the full year. North America had a pretax loss of nearly 1.6 billion. That's down 3 billion compared with 2004. The decline primarily reflects unfavorable cost performance, lower marketshare, lower dealer inventories and adverse exchange. South America had a profit of 389 million. That is 249 million better and reflects net pricing and favorable volume as well as a stronger Brazilian currency. Pretax profit in Europe was 136 million. That is 22 million better than 2004 reflecting favorable cost performance and exchange partly offset by unfavorable net pricing and product mix. PAG had a pretax loss of 100 million. That is 640 million better than a year ago. And consistent with the fourth-quarter, the improvement primarily reflects new products mainly at Land Rover that resulted in improved net pricing and a richer mix. Asia-Pacific reported a pretax profit of 61. That is 16 better and Mazda and associated operations had a 255 million profit, 137 million better than 2004.

As in the fourth quarter, the improvement reflects gains in our investment in Mazda's convertible bonds as well as higher operating results at Mazda. In other automotive, was a loss of 207. That is 86 million better than the prior year, more than explained by higher interest income on our cash portfolio.

Now this slide shows fourth-quarter and full year automotive cash and cash flow. We ended the quarter and the year with cash of 25.1 billion. That includes 1.4 billion of short-term VEBA assets. That is up 5.5 billion compared with September 30 and up 1.5 billion compared with December 31. Our operating cash flow was 500 million positive for the quarter and 1.7 billion negative for the full year. Excluding separation payments, the full year cash flow was 1.3 billion negative. Within our operating cash flow, net spending was 300 million negative for the full year and working capital was 1.3 billion favorable for the full year. Other was 1.3 billion unfavorable and this represents primarily expense and payment timing differences for items such as marketing, warranty, and retiree-related cost. Also included in this were items such as a difference between Mazda's profits that we record and the dividends that we received from them, the currency translation effect on cash and working capital and the effects of hedges. And separation payments were 400 million for the full year. You can see the other changes in cash including 2.7 billion in pensions and long-term VEBA contributions. We made the $1 billion final Land Rover payment and 700 million related to the Visteon restructuring.

Overall, operating cash flow was worse than we had previously expected for 2005. This primarily reflects the impact of incremental production reductions that we took late in the year and this effects accounts payable. We had a richer mix of cash incentives than we had forecasted and a higher than previously planned level of in transit inventory around our system and a small recalendarization of our spending plan. About $500 million of this will reverse in early 2006. In fact, some of it already has, particularly the in transit inventory that has now crossed borders and we can recognize the revenue and we have the cash.

In case you're wondering, we did not include our statement of cash flow with our financial statement this morning, as is our usual practice. This is because of complexities related to closing the Hertz transaction on December 21 and the full cash flow statement will be available with the filing of our 10-K.

Now this slide provides an update on our worldwide pension plans. Our worldwide pretax pension expense in 2005, excluding special items, was 1.3 billion. That is up 500 million from 2004 reflecting primarily lower discount rates, which in the U.S. were 5.75%, down 50 basis points and in the U.K., 5.25, down 25 basis points. Worldwide pretax contributions to pension funds were 2.5 billion and at year-end 2005, our funding shortfall for U.S. funded plans was 500 million and for worldwide pension plans was 10.8 billion. That is 1.5 billion better than at the end of '04. Our actual 2005 return on our U.S. plan assets was 10% and the year-end assumptions are shown here used to calculate the '05 year-end obligation and the '06 expense. The expected return assumption for the U.S. plant is 8.5%, down from 8.75 a year ago and this change reflects an evaluation of historical fund returns, data from other companies, bond yields and inputs from investment advisers.

In addition, the weighted average U.S. discount rate at year end 2005 was 5.61%.

This slide provides worldwide OPEB information. 2005 pretax OPEB expense was 2.8 billion, up 400 million from 2004 reflecting primarily a lower discount rate and revised ultimate trend year. We moved that from 2010 to 2011. In 2005 we contributed 200 million to our long-term VEBA and at the end of last year, our OPEB plans had a funding shortfall of 32.8 billion compared with a shortfall of 32.3 a year ago. Our actual long-term VEBA returns were 10.9% and similar to the change we made in the pension area, our expected long-term VEBA return has been reduced to 8.5%. In addition, the weighted average discount rate at year end 2005 was reduced to 5.73. Not shown on the slide, the total U.S. healthcare expense in 2005 for employees, retirees and their dependents was 3.5 billion, up from 3.1 in 2004 reflecting higher postretirement expenses. Healthcare costs were up, therefore we were $1100 unit in the U.S. in 2005.

For hourly employees, the recent agreement with the UAW will increase retiree cost sharing for healthcare benefits. A UAW controlled defined contribution VEBA will be established and mitigate the retirees' cost of benefits and the VEBA will be funded primarily through wage diversions from active hourly employees and a $108 million company contribution over several years. The Company also has committed to make capital investments of 900 million over the next five years for projects related to innovation and new technology. And upon implementation, which is pending court approval, U.S. OPEB obligation will be reduced by about 5 billion and average annual net corporate cost savings will be about 650 million.

Cash savings are projected to be about 200 million per year. So after this is approved, the 32.8 obligation will go down by about $5 billion. And for U.S. salaried employees, effective January 1, 2007, if they are hired before June 1, company costs for retiree healthcare will be capped at 2006 levels. And employees hired after June 1, 2001 participate in a defined contribution retiree healthcare plan. U.S. salaried employees hired on or after January 1, 2004 no longer receive company paid postretirement life insurance benefits. For all others who retire on or after June 1, 2006, company paid retiree life insurance benefits are limited to $50,000. And these actions on the salaried side reduced our 2005 year end OPEB obligation by 3 billion and average annual expense for '06 and beyond by 400 million and the cash savings related to that will grow over time.

Now switching to financial services. Earnings at Ford Credit were 737 million in the fourth quarter, 122 lower than last year and for the full year, earnings were almost 3.9 billion, 570 million lower than a year ago. In pretax profits at Hertz were 121 million in the fourth quarter, up to December 21st that is up 14 million and for the full year Hertz profits were 569, up 76 million.

Other financial services earned a profit of 23 million in the fourth quarter and reported a loss of 38 million for the full year and the full year results included the write-off of aircraft leases related to the Delta bankruptcy in the third quarter of '05. And the decline also included the nonrecurrence of several gains from property sales during 2004.

Now this slide explains the change in Ford Credit's pretax profit for the full year. Compared with 2004 Ford Credit's full year pretax profit of just under 3.9 billion was down as I mentioned 570 million. The decline primarily reflects lower volume and margin, offset partly by lower credit losses and least residual costs. And the lower volume in margin reflect a decreased receivable level and higher borrowing cost, and the improvement in credit losses reflected continued good performance in our loan portfolio. The continued improvement in credit losses also resulted in lower levels of credit loss reserves.

Volume was lower and at December 31 our managed receivables were 150 billion; that is down 18 billion from the year-end '04. And as shown in the memo fourth-quarter pretax profit was also down compared with '04 and the causal factors are similar. Over the last three quarters Ford Credit's profits have declined compared with the prior year as a result of higher financing costs, nonrecurrence of release of credit loss reserves and a shrinking asset base and we expect the decline in profits to continue this year.

This slide summarizes the full year results of our planning assumptions and operational metrics. And for the full year total industry sales were 17.5 million units in both the U.S. and the 19 markets in Europe that we track. On the operational side, our quality performance was essentially flat this year based on published metrics. Our marketshare performance was disappointing particularly in North America and our full year share results were worse than our objective with a substantial decline in North America more than offsetting improvements in several other areas. Our cost performance as indicated earlier was 1.3 billion unfavorable for the year; capital expenditures were 7.1, about in line with our target of 7 and operating related cash flow was 1.7 billion negative for the year as we discussed.

And this slide shows our full-year results by operation. On the auto side North America was significantly worse than the milestone and we have talked a lot about that. South America beat its milestone and Europe's profits were within the range. PAG fell short of the milestone, however, the results represented a significant improvement, 640 million from a year ago. And Asia-Pacific, Africa and Mazda delivered profits of over 300 million exceeding the milestone and financial services was well ahead of the milestone there. So that is the end of the presentation and I will be happy to take your questions.

(OPERATOR INSTRUCTIONS)

We ask that you please wait until you have a microphone before asking a question and please remember to state your name and affiliation. For those of you who are listening in you will be able to ask questions the same way you do on a normal earnings call and we will intersperse your questions with those here in the audience. In order that we can get as many questions in as possible in this abbreviated time frame we ask that you keep your questions brief and also that you limit your questions to 2005 results. We will have plenty of time to address your questions about 2006 and beyond later this morning. For those of you listening in by webcast we do not have a way for you to ask questions at this session, but if you submit questions to Ford IR at ford.com we will be able to take questions from you on our second Q&A session later today. With that let's start with the investment community.

Rob Barry, Goldman Sachs. A question on slide 5 you talked about positive volume and mix. I know that is on a global basis, but I was wondering if you could give us a little bit more color there. I think it looked like production in North America which I assume is the big piece of this was pretty significantly down year-over-year on trucks but up on cars, and normally you think that has a pretty negative impact on mix. Can you perhaps provide a little color there on North America and what's behind that .2 plus.

Yes, the pricing in the fourth quarter. That was, that's a funny thing. Our dealer inventories for the year were down. I mentioned that and that contributed to the $1 billion reduction in our profits year-over-year. But during the fourth quarter our dealer inventories in the U.S. actually grew by more than they did a year ago, because we reduced our dealer inventories in the U.S. so much during the third quarter of 2005, because of the success of the family plan. So in a sense the full year dealer inventories were down but on a year-over-year basis we had more production of cars and trucks in the fourth quarter than we did in the fourth quarter of 2004. Because we were coming from a much lower dealer inventory level at the end of September 30, even though dealer inventories ended the year lower the change during the fourth quarter was more and that is what is driving that piece right there.

Jon Rogers, Citigroup. The thing on that same slide it looks like net price performance was pretty favorable in the fourth quarter. Can you just talk about that, give us a little bit more color on the U.S. component of that net price performance. You lost marketshare so obviously you're sacrificing some marketshare with price. Can you talk about that dynamic and is it sustainable going forward?

Yes, our net pricing in North America was favorable and that would be in the U.S. for Ford and Lincoln Mercury. And it was 1.9% in the fourth quarter but it was really 1/10 of a percent negative for the full year I think there were some ups and downs. It was negative in the first quarter and the third quarter, and positive in the second and in the fourth. And these large discount plans that we had during the year and the big changes in volume and production had something to do with that. For your purposes I think you would be far better off just to think of the full year as slightly negative in a tough market. And the fourth quarter I wouldn't dwell on that too much. It's really kind of lumpy in that area.

Brian Johnson, Sanford Bernstein. Two questions. First, probably for Dave. On the Ford Credit, some other consumer finance companies saw delinquencies rise 4Q based on the bankruptcy bill and a pull forward of personal bankruptcy filings. It didn't show up in your loss to receivables or your repos. Did it show up at all in delinquency or do we have any other indications that it had an effect on you?

I think we are going to have a microphone -- we don't quite have it yet. There we are.

Hi. Delinquencies were up a little bit in the fourth quarter from the third but well below where we have been over the last seven years. The impact frankly from the bankruptcy change -- it is pretty small on us, probably under $20 million. So given the quality of our portfolio, it didn't have a huge impact.

Question, on the OPEB trend rate, what were the factors that led to your cutting it from 9% to 7%?

We have been working hard in this area for the last several years to improve the utilization and the delivery and effectiveness of providing healthcare and we have made a number of efficiencies and it is really those efficiencies following through.

Let's switch to the phone for one question please.

Rod Lache, Deutsche Bank.

I was hoping you could talk a little bit more about this improvement in North America. It sounds like you are saying don't read too much into the pricing and mix. Are the new midsize cars having any effect on the mix, its material and can you talk a little bit about the net material cost reduction? Is this basically just raw materials that are causing this positive in the quarter or is it some improvement in the supplier cost reductions?

I think it's -- let me start first with the material cost. It was 200 million favorable and this is an area where we are going to be placing a lot of emphasis and you'll hear a lot more about that in the next presentation. It's the leading edge of improved material cost performance that you will be seeing from the Ford Motor Company. The first part of your question was what? I'm sorry; I missed that.

Well, it sounds like you are downplaying the pricing and mix that we saw in the quarter, which was pretty favorable. Can you maybe talk a little bit about what the new product impact is for example on the mix? Is it being overwhelmed by the decline in trucks or is the new midsize cars having some positive effect here?

Well, the new midsize cars are definitely having a positive effect in sales and we are seeing that increasingly as we go forward. I didn't mean to say downplay the fourth-quarter pricing and mix. I was just saying there is a lot going on in there and in terms of extrapolating and projecting going forward for your profit models, I would suggest you look more at the average year rather than the fourth quarter. That's what I was trying to say.

Vladimir Jelisavcic, Longacre Management. Just a couple of questions. Why was the SG&A cost up 460 million for the fourth quarter year-over-year? And also can you comment on whether you will have to pay any cash taxes for the sale of Hertz please?

On the cash taxes, I think we probably won't be having to pay a lot there. We have got -- our tax people have done a nice job of planning that through. The SG&A -- it was -- let me get back to you on that sometime. There are several things going on in there that are not really performance driven. I can think a few of them being that in the fourth quarter, we consolidated the automotive components holdings and so year-over-year, that extra piece is in there and the same is true of consolidating automotive alliance. That's in there. There are one or two other things that I can't recall right now. But it is really -- if you think of SG&A as our staff overheads and things like that, on a constant basis, they are coming down. I think there is also some exchange in there as well if you're looking at just the numbers in SG&A. It is really nonperformance kinds of things. The underlying comparable cost trends are favorable on SG&A and they will continue in that direction.

Chris Ceraso, CSFB. Maybe this is kind of a follow-up to Rod's question. Can you give us a walk from either the third quarter to the fourth quarter or year-to-year in the fourth quarter just for North America kind of like you do in the slides for the overall automotive business? How much of the improvement came from volume and mix and how much came from cost performance and how much came from material cost reductions, etc.?

For the fourth quarter?

Yes, for the fourth quarter either in comparison to the year-ago quarter or versus the third quarter.

Well in comparison with a year ago, the biggest -- let's see. The improvement was -- what -- $327 million reflecting cost reductions and favorable net pricing in the scheme of things. Marketshare was lower. As I mentioned, on a year-over-year basis, dealer inventories were higher even though they ended the year lower than they did a year ago because of the change during the fourth quarter because we had such low inventories at '05. So the marketshare and the dealer inventory kind of washed each other out in the fourth quarter. So what flowed through was the cost reductions and the favorable net pricing.

Chris, you need a mic please.

You actually built fewer units in the fourth quarter than you did a year ago, right, even though you are building inventory? So how is that a plus?

Well it's a plus in the sense that it nearly offset the decline in share. There is a lot going on in this area of volume this time because of the sale of Hertz and the fact of the way we -- for how we account for units that we sell to daily rental companies. It has some effect here. I would say it is in the net pricing area and I would say on a going basis, the best way to think of it is net pricing was slightly negative during the year.

And then just one last one, is there any benefit from taking the cost trend rate down in healthcare or does that not take effect until '06?

That takes effect in '06.

Let's switch over and take a couple of questions from the media. Right up here in front.

[Tom Walsh], Detroit Free Press. Could you elaborate a little bit on the personnel reduction expenses, 960 million fourth quarter, a little more than that for the year? It looks like they were mostly in the fourth quarter. How many people does that reflect taken out and how did that happen?

Well we reduced our total automotive employment on a comparable basis by 10,000. We had 2000 come out in the credit company and 10,000 automotive. Some of those came out with attrition and some of those came out with these separation programs that are in the fourth quarter. And those include hourly and salary here and in other parts of the world, primarily Europe.

Can you put any figures on the impact on oil in terms of your mix, particularly on the truck side, particularly on the Explorer?

Well, it's no secret that gasoline -- oil prices are a lot higher and really went up kind of in two steps kind of in the Spring and then up again in the Fall. And gasoline prices were high. And that did have an effect and what we see is a longer-term trend away from truck-based SUVs that began two or three years ago, which really accelerated during this year. And that is no secret. We have discussed it on several occasions and we had been planning all along for this change in the segment. That's why we have got the new range of crossover vehicles that you saw at the auto show in fact. Now what we didn't know is that the change would occur as rapidly as it did because gasoline prices did move up in the high $1.70-$1.80 level they were about a year ago up to $2.80 or so and then they leveled off in the $2.30 to $2.50 kind of range that we have been in for a while now. That has had an effect on the sales of truck-based SUVs.

Can you put any figures on that, how much of the shift in mix? How much of a financial impact directly in terms of revenues, in terms of profitability from virtual collapse for example of the Explorer sales, half of what they peaked at and some of your other products?

We don't break out the profitability and the change in profits by individual product lines. Clearly it was a significant event and we talked about that in April and May and there is no secret there. The sales are down. And we have plans to participate in the market as it continues to evolve.

We have time for one more question.

[Bryce Hoffman], Detroit News. Don, are all of the costs of the Visteon agreement factored in now or will see more costs going forward?

When you say costs you mean one-time special item kind --?

Yes.

There may be more as we work to reduce some buyouts of the hourly employees but not significantly, nothing on the order of what we have seen in the last couple of years.

Thanks everyone for joining us this morning. We knew that with an abbreviated time frame we wouldn't be able to get all your questions and we apologize. Members of the Ford IR staff and the public affairs staff will be available later today and the rest of the week to handle any follow-ups. We will now take a short break. While those here in Dearborn reassemble down the hall for the business outlook presentation that begins at 10.30. If you are participating by phone or the webcast, no need to reconnect. Please just stay on the line.

(Break)

(Music playing over speaker) -- The "Way Forward" contains some strong medicine for our North American business but it also contains vision, strategic focus to rebuild. With it, we will retake the American roadway. Now Mark Fields will explain the details of the plan shortly. But the full story of what is happening at Ford can't be told by cuts. You can't cut your way to success. The full story is about what Ford stands for and what we will no longer stand for. Ford Motor Company stands for a farsighted commitment to growth. We stand for a renewed focus on the customer. We stand for boundless innovation in every aspect of our business from design, to safety, to fuel efficiency, to efficiency on the factory floor. We stand for the distinctive look, feel, quality, toughness, boldness and fun of automobiles that are unmistakably Ford. And we stand for the hard-working men and women of Ford Motor Company and their families.

Business plans change as the world changes but these principles will never change. Here is what we will not stand for; incremental change, avoiding risk, thinking short term, blocking innovation, tying our people's hands, defending procedures that don't make sense and selling what we have instead of what the customer wants.

In short, we will not stand for business as usual. When I took over as CEO at the end of 2001, we were awash in red ink, losing more than 5 billion that year. In 2002, we launched a major effort to revitalize our company. We divested ourselves of several noncore businesses and created the biggest wave of new product launches in our history. Since 2003, we have made money each year. In fact, this morning, we announced net income of $2 billion.

Outside of North America, we have made continuous progress. Our automotive operations in Europe, Asia and South America were all profitable last year. Mazda is enjoying its best performance ever. Jaguar is bringing out fast, beautiful, groundbreaking cars. Aston Martin is expanding. Land Rover's largest ever introduction of new products is winning in the marketplace and Volvo is entering its most aggressive product period ever with five new models in the next 18 months.

In parts of the world where the car market is growing sharply so are we. We are doing especially well in Russia, Turkey and Hungary. In India, we introduced our most important new product in many years and Ford sales in China, the fastest-growing market in the world, were up 46% last year. We are so proud of our success around the world but here on our home turf we must do more. The plans we announced in 2002 were not wrong. They took us as far as we could go without making dramatic changes. But that is not nearly far enough especially in light of how much the global marketplace has changed.

Oil and steel prices are up. Competition from abroad is intensified and domestic demand for SUVs dropped sooner than we anticipated. We need to change the business model that has existed for many decades at Ford. But how will we do this? First, we're taking a more farsighted approach. Last year, we stopped publishing quarterly earnings guidance. This was the result of the tremendous volatility in the market as well as the spike that we saw in steel, crude oil and other commodities.

Today, I am announcing that Ford Motor Company will no longer publish annual earning stands either. Now this decision may be contrary to the advice from some of the people in this room. It is not that we don't value your opinion. We do. But we need to underscore an important point inside the Company and out. We cannot succeed in the long run if we are focused only on the short term. We must see guidance by our long-term goals of building brand, satisfying customers, developing strong products and accelerating innovation. Over time, we believe this approach will lead to sustainable profitability. We will be able to judge our results as we report our progress.

We do have extremely rigorous targets for cost capacity utilization and other traditional metrics but we will also be managing to allow our employees more freedom to take smart risks and to demonstrate their creativity. And Mark will elaborate on all of this in a moment.

Second, we are going to sharpen our focus on those who count most -- our customers. They are changing and we are going to change with them. True customer focus means that our business decisions originate from our knowledge of what our customer wants, both today and tomorrow. If you build it they will buy it. That is business as usual and that is wrong. If they will buy it, we will build it is right and we are going to go back to it. Our over-reliance on SUVs was business as usual. We are pleased obviously with their profitability and hoped the demand would continue to rise even though the day would come -- we knew that day would come when customers would begin moving to other segments, like cars and crossovers.

Our product plans for too long have been defined by our capacity. We developed vehicles to fill plants sometimes at the expense of creativity. And that is why we must reduce capacity in North America. From now on, our products will be designed and built to satisfy the customer, not just to fill a factory. We are going to go way beyond what we have ever done to find out what is on the customers' mind but we are determined to do even more than that.

My great-grandfather once said of the first car he ever built, "If I had asked my customers what they wanted, they would have said a faster horse." At Ford, we're going to figure out what people want before they even know it and then we are going to give it to them. It is where we began and it is where we must go. This is going to require change number three. We must unleash our spirit of American innovation. To me, innovation is seeing what others can't see and using that vision to build what others have never built. It is the only way to make a car that is smaller yet roomier, lighter yet safer, faster but more fuel efficient. Innovation resolves contradiction. It flattens old barriers and it is at the heart of all progress.

Innovation has a very specific purpose here at Ford. It will drive the bold American designs of our cars and trucks giving them the uniquely American look and feel that reflects our country's spirit, ingenuity and sense of adventure. We will drive our new advances in safety. Ford and Volvo engineers are working together on safety innovations like a new collision avoidance system, night enhanced vision and the next generation airbag. Finally, American innovation will drive our new advances in fuel efficiency to offset high gas prices, the environmental impacts and dependence on foreign oil.

By 2010, more than half our Ford, Lincoln Mercury products will have hybrid capability. We will have the capacity to produce up to one quarter of a million hybrids a year and to scale up as the market demands. Right now, we're also offering four new flex fuel vehicles for 2006 that run on a mixture of gasoline and ethanol. These new advances in fuel efficiency as well as bold American design all spring from innovation.

Now there is a lesson for us in the launch of the Ford Escape hybrid. The Escape was the first hybrid ever engineered, designed and built by an American automaker and the first hybrid SUV launched by anyone. As we tried to design it and test it and launch it on time, we found that the old systems and methods were getting in the way. So we put scientists and product engineers on the same team and offered them the flexibility to get the job done. They delivered the product on time, generated more than 100 patents and developed new design techniques that we're using now to develop other products.

Well getting scientists and engineers together doesn't sound so complicated. Getting management off their back doesn't sound revolutionary. So why didn't we do this before? Because we didn't have to. The system in place was good enough for getting other products out at that time. But now the question is what other bureaucratic walls have we built that are holding us back. The Rouge is another example of innovation. Despite cynicism and institutional barriers, we built the most progressive assembly plant in the world. The Rouge marries lean, flexible and environmentally friendly manufacturing with America's best-selling vehicles, the F-Series trucks.

Over time, the Rouge will save us many millions of dollars not just because of the green roof but in energy costs like heating, cooling and lighting. Projects like these need to be the rule and not the exception.

I like to tell school kids about a time 100 years ago when my great-grandfather, Henry Ford, built his first car in a shed behind his house. At the end after he was finished, he realized there was one thing he hadn't anticipated. The car was too big to go out the door. He actually had to knock down a wall to drive it out. We intend to remind people every day that if you want to build something that has never been built before you may have to knock down a wall or two.

Today, we're moving from a culture that discourages innovation back to a company that celebrates it. In this effort, we recently sent out a mailing to 120,000 U.S. dealers, employers and retirees asking for ideas. Going forward, our employee evaluations will include a section on innovation. We are also going to design compensation plans that reward new thinking. And we're going to create a way for employees to appeal a decision even if they have an idea and the boss says no. We also launched an innovation website in November to solicit ideas from employees. In our first month we received more than 1000 ideas and we are following up on some very promising ones.

You know this company was founded by an inventor. We want to make sure today that the Company is overflowing with innovators. We are going to find them, encourage them and then we are going to reward them. This is what it is going to be like at Ford. Farsighted, customer-focused and innovative. At the same time, we must make some dramatic improvements in our cost structure.

Mark will talk shortly about our plants and our employees. Our capacity must be tailored to our customer needs to a level that will boost profit margins and stabilize marketshare. We also have to reduce the gap between Ford and competitors in material costs. Doing so will not only improve our cost structure through economies of scale but it will allow us to foster greater innovation through stronger, smarter partnerships with our key suppliers.

As you know, our healthcare and legacy costs are enormous. We have been working in partnership with the UAW to address the ever escalating cost of our healthcare benefits, including a recently approved agreement to reduce costs in a reasonable way. Still, more progress is needed. We can't solve this problem alone, not when healthcare costs nationally are rising 8% a year and the system is full of disincentives to control cost. The problem will only be solved with business and government working closely together. Our U.S. based companies to remain competitive worldwide we must find new solutions to this problem.

You know just as important as setting the strategy for the Company is finding the right people to lead it. Mark Fields is our choice to turn around North America. He is a great motivator and a great leader. He has the kind of courage, candor and communication skills it takes and that we need to turn tradition on its head. And he will do it.

Our plan in North America reflects lessons from our successes around the world, including Mazda where Mark led the turnaround by telling his team change or die. They changed. And under Mark, North America will change too. Anne Stevens is working with Mark as Chief Operating Officer of the Americas and the first female Executive Vice President in Ford's history. She is a no-nonsense, straight talker who takes on tough challenges and doesn't back down. Before taking on the Americas, Anne was responsible for the dramatic turnaround in our South American operation.

That team is further bolstered by Bob Shanks, the CFO of the Americas and the financial brains behind Mazda's and Land Rover's successful turnaround. Bob has brought a comprehensive financial perspective to the team and a deeper sense that cutting alone is not enough. We must invest in our future if we're going to have one.

In closing, I want to emphasize something I said at the start. We are making important announcements today about the "Way Forward" but this change has already begun. And the proof is in our product. For the third year in a row Ford F-Series was named the truck of Texas and was the best-selling vehicle in North America for the 29th year. Ford 500 and Mercury Montego were the only sedans to earn the Insurance Institute gold rating for frontal, side and rear crash test performance.

The 2006 models of the Ford 500, Ford Focus and Mustang convertible have all been rated among the top two in their class by Consumer Reports. And the Ford Fusion, Mercury Milan and Lincoln Zephyr are all off to a very good start. These products will help us stabilize our marketshare and move toward long-term sustainable profits. But that is only the beginning.

Let's imagine for a moment that we didn't have a 100-year-old history, a well loved brand, economies of scale, loyal customers, great suppliers and committed dealers. Imagine instead that we were a startup company without all those advantages and we had to compete against the best companies in the world. What would we do? The only way to compete would be to become farsighted, customer-focused and innovative. Exactly what we were 100 years ago and exactly what we need to become today to win again in America and around the world.

For too long we have used the advantage of size to avoid change. Now, we're going to use the advantage of our size to accelerate change. We are going to be a big company that thinks like a small company and if we can do that, Ford will win and win big. I appreciate the fact that winning will require sacrifices by the people of Ford and there will be fewer of us here in the future than are here today. We take these difficult steps with a sense of compassion and gratitude for those who have served us with all their hearts. But we must press ahead for the good of all. I know that if we come together behind these shared goals we can seize our heritage of innovation and emerge stronger than we have ever been.

Thank you and now I would like to have Jim Padilla come up and talk about our global automotive operation.

Thank you very much, Bill. Today I'd like to talk a little bit about our global operations. In particular, I think we ought to reflect back on 2005 just a bit. To start with, it is very important to remember that Ford Motor Company on the automotive side of the business was profitable in every region of the world except North America. It is also important to understand that we introduced nearly 40 new products around the globe, many of which Bill mentioned, that are gathering new customers to all of our brands. Our quality continues to improve and we've gained share most importantly in growth markets like Russia, like Turkey, like China, like India, very important focused areas for Ford and our future.

Land Rover has rejuvenated itself through product initiatives and achieved record sales. Aston Martin has done the same thing. Mazda, behind its new brand identity for Zoom-Zoom, has recreated its presence around the globe and that is creating its best results ever. Also important to understand that Ford as an enterprise will continue to focus on maximizing our global synergies. Synergies that will create more new products, more flexible plants, common processes, lower investments, economies of scale that will deliver more new product faster for all of our markets and all of our brands. All of this we made great progress on in 2005.

Bill has said that innovation is our compass. It is driving everything we do in Ford Motor Company. It drives our products. It drives our processes. And it is having a huge effect on our business structure. When we look at that, we start by talking about our global product synergies. Last year at this event I talked about our C1 technology and in that I indicated that in 2005 we would be into our third generation of product derived from C1 technology. All of those products are out there now, more than a dozen of them. Take the Ford Focus. Ford Focus today is produced in over 10 different assembly plants around the globe, many of those in the Asia-Pacific region. And by the way, it is not just for Ford. We have also -- we are in the process of launching the Mazda 3 and the Volvo S 40 in our plant in China, Chongqing. We are spreading our wings globally with synergistic products.

This past year, we also had major launches for an architecture called CD3. The genesis of that was from the Mazda 6. From that, we developed the Ford Fusion, the Mercury Milan and the Lincoln Zephyr. We have more products coming at the auto show. You saw the new Ford Edge concept that will be out later this year, the Lincoln Mark X and the exciting Mazda CX7.

We are driving more new products faster across many brands and many segments. We also have our large car architecture, which we called D3. The genesis of that was the Volvo XC90, from which we spawned the Ford 500, the Mercury Montego, the Ford Freestyle and we have shown a couple of exciting concepts that we think offer great potential, such as the Ford Fairlane and at the Detroit show, we gave a glimpse, a glimpse of the potential future for Lincoln with the Lincoln Mark X and there is more to come. We are doing similar things on our truck lineup and all of our products globally. Stay tuned.

Now we aren't just focusing on vehicle architectures we are also working very hard on shared technologies in other areas. In particular for clean and fuel efficient powertrains. Bill mentioned the hybrids. Bill also mentioned biofuels. How about diesels? We will produce more than 850,000 diesels this year. There will be 13 different derivatives. They represent about 50% of our market in Europe today, an important part of fuel efficiency going forward.

Likewise, we have a global I4 engine that we share in the development with. It is produced in four different locations globally. We produce 1.1 million units a year. We have 13 different configurations servicing Ford, Mazda, Volvo, all of our brands around the globe. That is what synergy is about. We are doing the same thing with (indiscernible). Our best example is role stability control that was developed here in Dearborn with the Ford scientific research staff. It was then first applied to Volvo XC90 and now is on the majority of our sport utility vehicles across North America. Shared technology as we go forward. Innovation is also going into the way we do business. Our business structure --

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-- and this list here just gives you one example of our first wave of suppliers who have been identified who will be supporting us and this will be a major change in the culture of Ford Motor Company and the way we do business with our supplier partners.

2006 remains a very important year for us. We will launch more than 40 new products globally around the globe. We will have to continue to focus on our synergy's efforts. Our costs obviously will be of great concern to us and at the same time while that drives profitability, the synergies will help drive better quality. We will be leveraging our products for volume, for scale, for quality of execution and profitability. And we will continue to invest in growth markets as we have over the past couple of years. This team will be intensely focused on delivering. Execution is the name of the game as we deliver for our customers, for our shareholders, for our people, the family of Ford.

With that, I would like to introduce Mark Fields who will take you through our action plan for North America.

Thank you, Jim and good morning, everyone. I'd like to join Bill Ford and Jim Padilla in welcoming the investment community and our media guests as well as the Ford employees watching around the world. I can't think of a better place for us to be today than in this design studio. In many respects the "Way Forward" begins right here on the sketches, the clay models, the computer workstations and the designers and the engineers. This is where our commitment to see the world through our customers eyes takes shape. And this is where the future of Ford Motor Company begins.

It is also fitting to be here because only a few steps away from this spot was where 50 people working on 10 different teams spent 60 days working together to develop our "Way Forward" plan. Every part of the business was represented. The teams were told to put everything on the table, to start with a clean sheet of paper, to be unconstrained in their thinking. It was liberating and invigorating.

The "Way Forward" plan we're going to discuss this morning is the direct result of those efforts. Efforts created on behalf of the tens and thousands of men and women at Ford whose passion and commitment will drive its success.

Now, let me be very clear and very candid. I recognize that you are a tough audience. You are skeptical and with good reason. My promise to you this morning is a level of candor that you might not have heard from us in the past and my request, including for those of you who have written us off, is to keep an open mind and ultimately judge us by our results and not our words. Those results, as Bill Ford mentioned, will be to slow the rate of loss and stabilize our marketshare in the near term and return profitability in Ford's North American automotive business no later than 2008. That is not a prediction; it is a promise and a clear way for you to measure me and the entire North American team.

I will spend most of my time this morning talking about the specifics of the "Way Forward" plan. But I will start with some of the external and internal challenges that brought us to this point. A lot has changed since 2002 when we launched the revitalization plan. In 2002, gas prices averaged $1.30 a gallon. Four years later, it is $1 higher. Fuel prices were $320 a ton. Today, it is nearly double that. Four years ago, there were 215 nameplates fighting for customers in the US. Today, there are 40 more in an industry where volumes have been essentially flat. The challenges are only going to get tougher.

The auto market in the US isn't expected to grow much through the end of the decade but there will be far more players slicing up that pie. We expect more than 300 nameplates by the end of the decade then. That is a 50% increase in the only seven years. That is unprecedented and it spelled the end of the big three as we know it.

Today, it is the up for grabs big six and a competitive shootout like we have never seen before. We've addressed many of these problems in a significant way since 2002. We reduced capacity by nearly one million units. We slashed material costs. We added new products. And we refocused on our core business again. But our revenues didn't keep pace with our higher costs. Our power plan was based on share growth to justify our overhead and frankly we were driven by cost and capacity, not enough by our customers. And there is not much we can do about the external environment but we can control our destiny and that is what the "Way Forward" plan is all about.

It is not a cost-cutting exercise or a retreat into smaller markets. It is a retaking of the American marketplace. It is time to play offense. It is time to fight back. What we are doing is what it takes to be America's car company. We are doing what it takes to give customers and our employees a reason to believe in Ford again. Our "Way Forward" starts with a sharp customer focus as the foundation for everything we do. We will be relentless in this regard because growing companies, the ones that are increasing their marketshares today, see the world through their customers' eyes. We have seen it work inside and outside of Ford.

Six years ago the world had written off Mazda. Mazda had no point of view in the marketplace. And its sales dropped to a record low. When I stepped up to announce Mazda's Millennium plan, I saw the same skepticism and the same questions as I see on faces today. But we had a plan, one based on the customer and the brand. We fought back and we delivered everything we promised and more. Today, with a deep understanding of customers and a very clear point of view in the marketplace, Mazda is posting record sales and record profits.

But this turnaround isn't just for Mazda. As you saw in our 2005 results this morning and as Jim mentioned, that same customer focus is turning around Ford of Europe and South America, Land Rover and Aston Martin. It is the same formula that has made Volvo so successful over many years. And it has been the mainstay of Ford trucks and the Ford Mustang for years.

Going forward, this customer focus will set up every part of our business; the products, the volume, the revenue and the cost structure. As Mazda and others have demonstrated, we can stabilize marketshare and ultimately grow by making customers central to our business model. It leads to stronger brands and a more targeted product portfolio. This clear view of the customer and our brand also improves product quality as well as the quality of the selling process with straightforward pricing that is clear and simple.

It leads to improvements in our cost structure and capacity and it will unlock the talents and energy of the entire Ford team through bold leadership. Bold leadership means being honest and realistic in our assumptions and our commitments such as initially slowing the rate of loss and then stabilizing our marketshare in the near term. It means adopting a change or die mentality and acting like a smaller more agile company. Bold leadership started in the way we developed the plan itself. We approached the job with more honesty, more speed, and better teamwork than I have ever seen in my Ford career. Walk these halls and you'll see the spark of a new culture and a renewed winning attitude. It is tempered by the sacrifices before us and the difficult actions we must take as a business. But there is an equally powerful and pent-up desire to take back our future.

When Bill Ford told employees last fall that innovation was going to be the compass that would guide our future, we were flooded with stacks of ideas, as Bill mentioned. When we asked the North American team for specific ideas for the way forward, we received more than 4000 suggestions in just two weeks. You see, being bold and innovative is not only about the design of our product. It is about changing the culture at Ford Motor Company. Now, just to clarify, there are many strengths within the Ford culture that we will and must preserve today. I've been impressed every day since arriving back in Dearborn with the intelligence, the work ethic, and the passion and the loyalty of the Ford team. What we are going to attack are the outdated habits that develop within any company that is more than 100 years old.

When I speak about operating like a smaller company, I am not talking about shrinking our size. I am talking about the way we operate, the way we make decisions, the way we relate to each other as a team. As Bill pointed out, we have grown too conservative, too hierarchical and too resistant to change and to new ideas. And frankly, true accountability has not been our strong suit. Acting like a smaller company changes all of this.

We need to preserve what is right in the Ford culture, but make the necessary changes to help us compete with the best, the fastest, and the most efficient global competitors. We realize that even today, there is going to be skeptics. There will be those who demand to know more of the plans, proprietary details, and metrics. But we at Ford are cutting our own path. We are establishing our own point of view, and we fully expect to be measured by the results that we have promised.

Let's start with more detail about our customer focus. One of the problems we have had in the past is that we have tried to be all things to all people, and that sometimes let us down a design path that was too conservative. In other cases, we let competition drive our investments and launch [me too] products, or worse, we invested in segments where our customers didn't care to follow. To stand out in a world that is awash with car manufacturers, Ford's brands and products have to be clear, relevant and distinct. And we have to be loyal to our customers if we expect our customers to be loyal to us in return.

The driving force, as Bill Ford said, is American innovation but it is not innovation for innovation's sake. It is to differentiate ourselves in the marketplace through design innovation, safety innovation and environmental technologies like hybrids. In North America, we will focus the innovation on three complementary brands; Ford, Mercury and Lincoln. Why three brands? Well at one time or another many who followed Ford have advised us to kill one of our brands and we invest the savings elsewhere. I have to admit I asked the same question when we started the "Way Forward" process. I challenged the team to justify each brand's role in our portfolio going forward. The conclusion, after a very in-depth analysis was that Ford was a stronger company with all three brands but if and only if each appealed to a different set of customers.

This analysis showed that there is more than enough room for Ford, Mercury and Lincoln to each have its own point of view in the marketplace. Doing without one of the three would not result in savings only lost customers and lost profits.

Let's start with Ford. The good news is that Americans buy more than one million F-Series trucks and Mustangs every year. Unfortunately, they don't buy enough of the other products from us. That is because we have had an inconsistent and in some ways unhealthy approach to the market. We studied the values and attitudes of tens of thousands of customers for clues that could help us strengthen our focus and we didn't just study our customers; we looked at everyone's customers. Our research confirmed to us what we already knew in our hearts. Ford strength and identity were defined by three words; bold, American and innovative. Yes, we're a global company and we are proud to sell premium brands like Volvo, Jaguar and Land Rover. But Ford is best in this market when our cars and trucks embody the American spirit.

We have come up with a phrase that we're using internally to define that spirit and we call it "red, white and bold". This phrase is not about wrapping ourselves in the American flag and it is not an advertising tagline. It is an internal rallying cry that reminds us what will drive us to success. It is about asking our designers and engineers to reflect American values and attitudes such as optimism, innovation and inclusiveness. It is about instilling the values and spirit of America in every Ford vehicle we produce in the same way that Volvo is unmistakably Swedish.

Visually in our product, it means bold American design. Many of our products already reflect this philosophy like the F-Series, Mustang, Fusion and the new Ford Edge that is coming this year. As we move forward, all of our products will embody this, from our smallest cars right to our largest truck.

Now let me talk about Mercury. We have earned some skepticism over the years with a haphazard approach to our products and marketing for Mercury. But there is something going on at Mercury that is very powerful and you know what? We probably haven't done a good enough job communicating it. Our newest Mercuries, the Milan, the Mariner and the Mariner hybrid are attracting younger customers to the brands and more women than Ford brand products in the same segment.

More importantly, our new Mercuries are bringing customers to Ford Motor Company as conquest rates are as high as 50%. So what is the attraction of Mercury? It's modern expressive design differentiated from Ford vehicles. Now our Mercury target customer is looking for product functionality that is similar to Ford vehicles but they do have different attitudes and values and they want a product that visually communicates that distinctiveness. It is also more personalized in the sales and service experience. Again, different from Ford vehicles. No American automaker is doing a good job at attracting these customers today and to be frank, I'm surprised by that.

You just have to look at the growing number of magazines that are devoted to modern design and architecture to get a sense of this trend in America. Just look at the people buying furniture from Design Within Reach and computers and iPods from Apple. These same customers are buying the Mercury Mariner and the Milan. We'll be more aggressive in appealing to them going forward with clear, modern differentiation in the design of Mercury, a unique purchase experience and marketing that is targeted, personalized and interactive.

Finally, there is Lincoln, a brand that has meant different things to a lot of people. I admit we lost focus and we created confusion. That is because for a time the qualities that define a Lincoln for our customers took a backseat to individual nameplates. Our vision is to make customers proud to own a Lincoln first and foremost.

Our vision is to make Lincoln the reward for people living the American dream. Lincoln appeals to different customers from those who need to showcase their success through a brand like Cadillac. Lincoln customers don't need to shout about success. They are self-made people with enough confidence to be elegant and understated. And that understanding of the Lincoln customer will drive our brand and our product decisions going forward. We will not waiver.

The new Lincoln Zephyr and the Lincoln Mark X are significant first steps. Going forward, we plan to give our Lincoln vehicles an even clearer point of view through their powertrain, unique comfort and convenience and of course unique designs. We are moving Lincoln to be our largest volume contributor in the Lincoln Mercury business. But we have no aspirations to take Lincoln to the world stage to achieve growth.

Lincoln is about American luxury and there are more than enough customers in this country who are living the American dream and who would prefer to drive America's luxury car. And that is where we are headed.

Now, with that understanding of our customers and our brand, I've come to realignment of our product portfolio and a significant investment in our future products. But again, we are going to cut our own path and make clear choices about where and how we will compete. We will use innovation as a differentiator throughout our lineup and we will bring to the market more products faster and more efficiently. Our product plan starts with investing in new and growing segments like more hybrid vehicles. Bill mentioned our commitment to produce 250,000 hybrids by the end of the decade, by 2010. That is a far greater commitment than nearly any one of our competitors. It helps families with high prices at the gas pump and it helps us attract more customers to our products than are coming today.

In addition to the hybrids that we have already announced or are already on the road, we are announcing four more hybrid vehicles by the end of the decade; the Ford 500, the Mercury Montego the Ford Edge and the Lincoln Mark X with more to come as we introduce future models and nameplates. We are also entering new white space segments like the one envisioned here by this Ford Fairlane [play] model. And investing in small cars as more and more customers realize that small is big in America. We predict that sales of small cars will grow by 40% by 2010. And Ford will be there with bold innovative and American small cars, not bland econo boxes. Small cars are ripe for bold design and innovation, but no company today is putting an American stamp on the small car segment. That means there is a huge growth opportunity if only someone is willing to seize it. Ford plans to seize it and you're going to be seeing a hint of what is to come with vehicles like the Reflex.

At the same time we will build on our strengths including increasing our product investment to fortify our F-series truck leadership. We will build on the momentum of our hot cars, like the Ford Fusion and the Mustangs with new derivatives and fresh appeal. And we will continue to build on the collaboration between our Ford and Volvo safety engineers.

Now one question that's surely on the top of your mind is how can we afford all of this? The answer is in changing the economics of our business. We will leverage our global scale like never before. It will improve the average age of our products or the time since the last major refresh from 4.4 years today to 3.2 years by 2008. This will put us in the same league as the best of the competition. We have taken some important first steps in architecture sharing with the Ford Fusion, Mercury Milan, and Lincoln Zephyr. But we have to do more. Today we build three vehicles on the Volvo and Ford design architecture of the Ford 500. Over time we will add four more cars and crossovers including front and all-wheel drive models with V-6 and V-8 hybrid power packs.

The benefits of capturing the global architecture, instead of starting from scratch, are huge. Our total investment for all seven products will be about 25% less than we would have spent in the past. And our aim is to have our entire lineup profitable by the end of the plan period from small cars to full-size pickups. Driving us is our global product development system. And it is based in part on Mazda's highly successful model. It requires us to do more planning upfront so that there are fewer changes down the line. The payoff? Product development times that are six to twelve months faster than today.

What is more, by equipping plants so that they can switch easily between products we will dramatically reduce the investment in each new vehicle. The conversion of our Oakwood assembly plant for flexible manufacturing which we announced earlier this month keeps us on track to convert 75% of our North American assembly plant to flexible manufacturing by 2008. But it is not enough to deliver more products faster. They have to be high-quality products. And improving quality requires innovation in the way we manage our people and our processes. Ford knows how to improve quality. In the early 1980s with the help of our UAW partner we launched our "quality is job one initiative." And between 1980 and 1985 we improved quality an average of 50% in our combined car and truck lines. Today, we continue to improve quality across our lineup. In Consumers Reports new car preview Ford had the best showing among domestic automakers, but you won't see us patting ourselves on our back because we also had 12 vehicles listed among the least reliable and that is unacceptable.

So we are accelerating the pace of quality improvements by readopting a quality is job one mindset. The first step is to achieve a rapid improvement in the quality of our current vehicles. To that end, we are aligning our engineering and plant teams around our top customer driven concerns. In addition, we are assigning all of our Six Sigma people or our black belts -- 1150 highly trained people -- to work on improving quality and product development and manufacturing. And we're pushing decision-making down to the people most qualified to act. That means giving quality teams in our plants the budget and the tools to resolve problems quickly.

Finally, we are expanding accountability and linking compensation directly to specific quality improvements. Now, even with the best products and the highest quality we cannot succeed if we continue with the irrational pricing and incentives that have been started by some of our competitors. Here again we are going to cut our own path. Let me start with pricing. For several years Ford along with GM and Chrysler have systematically raised vehicle prices to offset the higher cost of incentives. This has led to consumer confusion about the true price of vehicles and it has contributed to resale values that are generally lower than comparable Japanese products. This must end. So we are going to re-establish the value of our products through straightforward and simple pricing.

We started introduction of clear pricing two years ago with the Ford Mustang and last year with the Fusion, well before the other guys ever started talking about it. These vehicles have proven that well-designed and well-priced products with great appeal can break out of the incentive shell game. A growing percentage of our products have clear simple pricing and the "Way Forward" plan will make it 100% over time. We will bring sticker prices more in line with actual transaction prices and cap cash on the hood rebates as we introduce new cars and trucks into the marketplace. It will protect our margin and consumers too through higher resale values.

We're already closing in on the best of some of our competitors with products like the Ford 500 Mustang and Fusion which all launched with three-year residual values approaching 50%. This is a bold move away from selling the deal and back to selling on appeal. And we are committed to it even if the competition back slides. These moves will be accompanied by increased advertising that focuses on product design and product innovation. To support those competitive prices and simultaneously improve quality we will dramatically improve our cost structure. We are targeting net material cost reductions of at least $6 billion by 2010. That is $6 billion after all new product costs are added in.

To get there we will pursue more parts commonality in areas that are invisible to the customer and we will forge much closer and mutually profitable relationships with key strategic suppliers. I saw and personally experienced these type of relationships and the benefits they can bring to the business during my years at Mazda. As part of our line business framework strategy we announced last fall we have begun entering into long-term agreements with key strategic suppliers as Jim mentioned, to improve our business collaboration, accelerate innovation and drive higher quality and more competitive costs. Our agreements with Visteon to restructure the components business will also help us reduce our material cost.

Another enabler to commonality and more competitive cost is a single approach to product development in purchasing with a single objective and a single process versus each team working separately in the past. It might seem like a simple move but it is already providing savings and efficiency in Europe while improving the technology and the cost of our key commodities. From airbags all the way down to transmissions.

Finally, we are targeting lower fixed costs. As Bill Ford pointed out we are making sacrifices at every level. This includes our previously announced plans to reduce our salary related costs 10% by eliminating the equivalent of 4000 salaried positions by the end of the first quarter. This builds on the reductions we have already taken during the past few years. At the same time we must take the difficult actions but important steps to bring our capacity in line with customer demand. The hard but simple reality is that Ford has the cost, capacity and staffing of a company that is much larger than our sales and marketshare can support even under the best of circumstances.

Today, we find ourselves with plants running at about three-quarters of capacity and that is clearly unsustainable. Obviously, this has significant implications for our labor force. It is something we knew we would have to address honestly and with sensitivity to the impact on Ford employees and their families. Our pledge is to address those challenges in full collaboration with our union partners. To achieve the right capacity for the size of our business today we will idle and eventually cease operations at 14 North American manufacturing facilities by 2012 including 7 vehicle assembly plants. This does not include any automotive component holding actions related to our Visteon deal or any plans announced in our previous restructuring. These actions will reduce our assembly capacity by 1.2 million units or 26% by the end of 2008. This will help us improve our assembly capacity utilization rate dramatically.

I would also emphasize that most of these capacity actions are occurring early in the plant period with the most substantial actions completed by the end of 2008. In this process we expect to reduce plant employment by 25,000 to 30,000 positions both salaried and hourly over the 2006 to 2012 period. The financial impact of all of these actions this year will include charges for hourly personnel separations and fixed asset write-offs.

The facilities that will be idled through 2008 include our assembly plants in St. Louis, Atlanta, and Wixom, as well as our Batavia transmission plant and our Windsor casting plant. Production at our St. Thomas assembly also will be reduced to one shift. And we will make a final determination on two additional vehicle assembly plants later this year. As hard and as painful as it is to close plants and to reduce our workforce, we know these sacrifices are critical to set a stage for our stronger future. Importantly, that future will include a new low-cost manufacturing operation that we will build in North America at a location to be determined.

Now importantly as Bill and Jim outlined we are embarking on this plan with a running start. Our plan is being launched by a profitable company not one losing billions. And our plan is based on the already proven restructuring actions that have turned around other parts of Ford's global business. What is more, our commitment to innovation is clear and it will increasingly differentiate us in the marketplace. Our leadership in full-size pickup trucks with the Ford F Series has been the number one for 29 years is unquestioned and it will remain so. Our car business is growing. We are leading the growth in crossover vehicles. Today's fastest growing segment. Ford Credit is strong and profitable and our Ford and Lincoln Mercury dealer network is the envy of the world. These successes coupled with a realistic view of our challenges, are what gives us so much confidence in the "Way Forward" plan. It's what gives us so much determination to get it right. We are doing this for our employees, our retirees, customers, dealers, suppliers and investors. We want them all to believe in Ford and to unlock that goodwill and desire to see us win.

Literally hundreds of Ford's employees have now had their hand in our "Way Forward" plan. And for every one of us success has become very, very personal. We don't expect everyone to share our confidence after just one speech. The challenges we face are the result of decisions made or not made over many years. We understand this. And we won't fix them overnight. The comprehensive nature of our plan requires a long-term perspective. We know it will take time and we know it will be tough.

As I said when I started, the work of transforming Ford's North American business is already underway and it is moving into high gear today. It includes bold leadership, a change or die mentality supported by a motivated engaged workforce. It is about changing our attitude and that changes everything. It starts with a comprehensive strategy, one that begins with the customer and leads to a more powerful brand and an even stronger lineup of new products. It delivers quality, honest pricing, competitive costs and the capacity that allows us to return Ford's North American auto business to profitability no later than 2008.

Rest assured our "Way Forward" plan is not a retrenchment. It is about taking back our future, cutting our own path having a clear point of view. Being bold, American and innovative. We don't underestimate the challenges ahead, but I speak for the entire Ford team when I say we are eager to get on with it. We are eager to reclaim our place as America's car company. Thank you.

With that I would like to introduce Ford's Chief Financial Officer Don Leclair and he will take us through some of the financials related to today's announcement.

Good morning. We have shared with you the vision and Mark has given you the specifics behind the "Way Forward" plan. Now I would like to review the financial resources that give us the confidence as we kick off this plan as well as some balance sheet specifics. Then I will briefly cover Ford Credit and then wrap up with the automotive planning assumptions behind our 2006 outlook.

This slide recaps our extensive financial resources at year-end 2005. Including the proceeds from the sale of Hertz we ended up the year with cash of over $25 billion. We have $6 billion in our long-term VEBA which provides an additional potential source of liquidity over the next few years. Our automotive credit lines total 6.5 billion with no financial covenants or material adverse change clauses and the majority of these lines mature in 2010. This strong liquidity position is well in excess of our debt of 17.9 billion which has an average maturity of 25 years. You can see the maturity profile of our debt and we have 1 billion in debt maturing in 2006 and only 4.3 maturing over the next 20 years.

Now we will turn to Ford Credit which as we have said before is a core element in our business, and that is not just because it is a great source of profits which it is, but also because it forms a great partnership with our marketing and sales operations around the world. For 2006 we expect our managed receivables to decline to between 140 to 145 billion. In addition to lower assets margins will be down primarily because of higher borrowing costs. Favorable credit and residual loss experience are expected to continue in 2006 so we likely will not see the reductions in credit loss reserves that we have seen in the past two years. And Ford Credit will continue to reduce costs through operational efficiencies. We have and will continue to utilize a wide range of funding sources. In 2006 we plan to continue to reduce our leverage slightly. Ford Credit is likely a dividend profit after taxes and to retain at least some portion of any equity freed up as a result of decreasing the balance sheet. Overall Ford Credit will remain solidly profitable in 2006 although profits will be down from 2005.

This slide shows a trend in funding for Ford Credit. We plan on maintaining strong liquidity to meet near-term funding obligations as I mentioned earlier. And you can see that on the bar on the right at the bottom where we expect cash and cash equivalents to range somewhere in the 15 to 19 billion. We plan to expand and diversify our asset-backed funding by asset class, region and channel. For example we have completed 6 private lease transactions totaling over 8 billion in the U.S. and Canada. In addition we will continue to participate in the whole and loan sales market and we will access the unsecured term debt market when it make sense.

Now this slide shows our 2006 automotive planning assumptions and metrics. We are expecting total industry sales to be around 17 million in the U.S. and 17.3 million for the 19 markets we track in Europe. In terms of pricing we expect the industry pricing environment to continue to be tough here and in Europe. Our North American production schedule for the first quarter is unchanged from the previously announced level of 885,000 units. For Europe we expect first quarter production of 485,000, that is up 22,000 from last year. And for PAG we expect first quarter production of 195,000 vehicles, down 11,000. On the operational metrics we expect to improve our quality, on market share we aim to stabilize our increased share in all our markets. Cost performance will be favorable which I will discuss in a moment and capital expenditures will be about 7 billion.

In terms of cash we are targeting a year-end 2006 cash balance in excess of $20 billion. Now this page describes broadly how our costs will be moving in 2006 by element. We expect commodity costs to continue to increase; in addition depreciation and amortization also will increase. Our quality related costs are expected to be roughly flat for the year. The favorable performance in our vehicle quality will be offset by the nonrecurrence of last year's Firestone settlement.

Pension and OPEB expenses are also expected to be roughly flat as modifications to retiree healthcare programs we talked about this morning offset the impact of expense for former Visteon employees as well as lower discount rates and lower assumed rates of return. Manufacturing, engineering and overhead costs will be down in 2006 reflecting personnel reductions and other efficiencies. And product costs are expected to be favorable as we begin to see the benefits of the material cost reduction plan that Mark described just a moment ago. So overall we expect our cost performance to be favorable this year.

Here are our financial milestones for 2006. North America is projected to post a loss. And as Mark indicated North America will be profitable no later than 2008, but it is important to know that the path to profitability will not necessarily be linear or smooth. All our other automotive operations are expected to be profitable in 2006 and overall we expect our automotive operations to be in a loss because of North America. We expect there will be some special charges in 2006. At this point we can see about $1 billion. Of this about half are the two items that Mark discussed in his presentation. The remainder is related to personnel actions in Europe and to a lesser extent in automotive components holdings.

We also are taking a further look at cost for GEN, that's our jobs bank. Up until now, we have had relatively few employees in GEN. Because we expect these numbers to grow over the next few years, we are looking at the appropriate accounting for GEN costs. We also will have costs for accelerated depreciation related to idle facilities but these will not be included in special charges. Financial services is projected to be solidly profitable or as I mentioned earlier, less profitable than in 2005 because of lower earnings at Ford Credit and the absence of Hertz.

So overall, 2006 will be a transition year and, as Bill mentioned, we will not be giving any earnings guidance. So that ends the formal part of the presentation. I guess we'll take a break now.

(Break)

Ladies and gentlemen, good afternoon. We are going to start the Q&A session now. We have about an hour for Q&A. We are going to start out the session first with some questions from the investment community, then we will move to the media and then we will mix it up. So if you would direct your questions to Bill during the Q&A session, that would be great. Do you have the first question?

Vladimir Jelisavcic from Longacre Management. I just had a question regarding your actual December '05 and the projected December '06 cash balances, including the short-term VEBA where you ended December '05 with 25.1 billion of cash. You are projecting ending December '06 with 20.0 billion of cash. So my first question is where is that cash going? Can you give us an idea of how it is being spent and regarding your anticipated personnel reductions, can you talk about the possibility of using your ample liquidity to offer buyouts to employees?

As you know, we sold Hertz in part because it was noncore and we wanted to make sure we had the resources to do the restructuring of the Company that began last year with the arrangement with Visteon and continued with the headcount reductions and now into the plant closings and so on. So we wanted to have the liquidity and that is what we intend to use it for. We did end the year at 25.1, which is in our view an unprecedented level and it gives us a great deal of comfort. As we said this morning, we're not going to be giving any guidance and the $20 million -- I wouldn't take that literally. We want to be above that. So we can just say 25 down to 20, where is it going to go? Having said that, it is our plan to take care of the issues that we have. We will have some employee separations. Mark mentioned that and I mentioned that this morning. And we are going to be spending the money in the process of fixing our business.

Could you wait for a mic please?

No. The question was could we be a little bit more specific.

Because 5 billion is a lot of money and I respect the fact that it could be higher or lower and the 20.0 is just an estimate but it's still 20% lower cash. So it is a significant number and I think it would be in the spirit of openness and kind of facing your issues and being more open with the investment community, I think it would be consistent with that view to just give us a better idea of what you're thinking about doing with the cash.

I appreciate your point of view and I understand it and as we said this morning, we're not going to be giving any earnings guidance and the further we go into giving more and more guidance on specific elements of our financial outlook, the more we are in fact doing what we don't want to do, which is give earnings guidance. We have a long-term plan. It is very sound. We are all fully committed to it. We have the resources to pull it off. We are happy about that and we're not going to be providing any more details than that. Having said that, I would not in any way be alarmed about thinking about 25 minus 20 and doing the subtraction and being overly concerned about where is it all going.

It's Rob Barry from Goldman Sachs. I had two quick questions and one broader one. One is should we expect any financial impact in '06 from the "Way Forward" plan putting aside any one time items. Second, I was wondering if you could outlay what the assumptions are behind getting the profitability in North America by '08 in terms of share, the market overall. I'm assuming you're not taking into account any potential consumer downturn and I'm assuming it includes the healthcare deal.

And then a more broad strategic question is you talked about reducing investment per vehicle and I understand that there is a lot of cost savings to be realized from platform accomodization, etc.? But given how competitive the car market is and given you've deemphasized investment there, wouldn't it perhaps make more sense to spend more investment per vehicle to kind of regain share in that very competitive car market? Thank you.

Thank you. I think I'll have Don answer the first part of the question.

I think what you were saying was is you were asking will there be any benefits financially aside from special charges because of the "Way Forward" in 2006. The answer is yes. Mark mentioned some plan idlings. That is one. We have talked about personnel reductions that Mark mentioned. That is two. The material cost reduction -- in my remarks, I indicated that we expected to have the leading edge of the material cost reduction effect 2006 favorably. So in those areas, you'll be able to see it. We will report on our results every quarter and break it out in the kind of detail we had before and over the course of a couple of quarters, you will begin to see the patterns that impact quite a bit of savings from the "Way Forward" plan will be this year and it will continue to grow as we go along the way forward.

When I said in my remarks that in many ways the "Way Forward" plan had already begun, one of the elements that clearly falls into the category is the fact that we already have our global architectures well in place and so the plan that we have going forward does include a heavier presence in the car business but it does not necessitate us to spend a lot more to get there because we already have, if you look globally, the basic architecture to get us to where we need to be.

Well I just thought that the suggestion of investing in future growth is a very good one and maybe Mark Schulz could give us a little clue on what he is doing in the Asia-Pacific region where we are investing heavily on new products.

In the Asia-Pacific region a couple of our target areas for growth; India, ASEAN in China has a market and we have new plants under construction. We have invested in engineering in the past that covers architectures and kind of a footprint in place that allows us to launch new products and applications. There is a little bit of a time lag on that but I think you will see a lot of new announcements of new products introduced this year. We have increased our sales in China by 46% versus last year and a lot of exciting plans and products coming.

Just on the question about the assumptions in the plan from North American profitability through '08, does that assume through '08 flat share for Ford, flat market size in North America, etc.? Thank you.

Well in terms of share, as I mentioned in my remarks, our first objective is to slow the rate of loss and then stabilize our share over time. Clearly, we do have an internal timetable and metrics as it pertains to marketshare but we're not prepared to share that externally.

It's Jon Rogers from Citigroup. Following on to that question, can we assume that there is no additional contract concessions in 2007 in the North American profitability goal? And then in the absence of financial guidance, where can investors hold Ford management accountable this year? Can you give us maybe five or six metrics that we can monitor just to know that the "Way Forward" plan is moving forward?

Well on the UAW piece, we certainly don't negotiate in public and we have said that many times. But I don't think you need to assume that we have anything that is not in the contract going forward until we get to the contract. But it doesn't mean we won't be talking with the UAW. Of course we will and we talk with them everyday.

In regards to metrics and measuring it, we did put some clear ones out there. We had certainly the material costs number out there. We had the fact that North America is going to return to profitability no later than '08. You can track us all through the year, all through next year. We have monthly sales. We have quarterly reports. There are measures out there to say how things are going and so it's -- let me just be clear. One of those things -- when we laid out the 2002 plan, we were very specific in metrics. In some ways, as the world changed, it tied our hands a bit in terms of being able to maneuver and react. And as we put the "Way Forward" plan together, we have very tough stringent internal metrics, which we share with each other and share with Board. But externally this is a fluid market. We do want and feel we need the ability to change one area to compensate for another area and maneuver as we go through this because it is uncharted waters in many respects. And that is why we have laid out some tough metrics in areas where we have to go get and we know it.

In other areas -- marketshare -- you say why don't you give a marketshare metric? Well, we could go buy marketshare. We have talked about that before. But that is not what this is about. This is about true retail growth, organic growth to our marketshare.

Why don't we move to the phone and take a couple of questions?

John Murphy, Merrill Lynch.

On the spark of (indiscernible) strategy, just wondering if you could sort of quantify how far along you were and what percentage of your volume was currently on this global architect currently and where you expect to get (indiscernible).

I'm sorry. I had trouble hearing. Were you guys able to get that?

I'm sorry. The global architecture strategy, I just wonder if you could clarify where you currently are on percentage terms of your volume and where you expect to be in the next three to five years.

We have made tremendous progress with our global architectures. It has been led principally by the efforts in Europe, in combination with PAG teams over there where you are seeing multiple products that are small cars like [B] cars, then [C] cars, the Focus being the best example of that that I can give. That is across three different brands and about ten different products produced in about 11 different countries now. We are doing the same thing when you see the new [F80] coming out, when you see the new [F Max] that is coming out in Europe and the new Galaxy minivan are coming all off the same architecture over there.

So basically we started with our passenger cars and we have pretty much consolidated our passenger cars now and the global architectures and our next phase will be in our pickup trucks, our global pickups for compacts and then our large pickups and large SUVs for the U.S. market. So I would say that in global architectures, we are essentially about two-thirds of the way into that process and we are making great progress in doing that and rolling them out around the globe.

When we think about the shift towards SUVs and smaller cars, is this global architecture going to help you offset some of the inherently lower profit margins on those vehicles or how else are you going to deal with just those naturally lower margins?

Well I think it is safe to say clearly on smaller cars versus larger trucks, inherently the margins have been smaller. I think there are a couple of things. One is, as Jim mentioned, leveraging the global architectures. But it's not only just leveraging the global architectures, I spoke in my remarks about commodity business plans and components. And that is not only getting scale across here in North America but where applicable, also getting scale globally with our colleagues in Europe and Asia-Pacific. So that also helps change the economics.

I think the third think is -- part of the reason that we feel -- and our aim is to be profitable in the segments that we are in is we have too much cost structure today and obviously that is why taking out the capacity and some of the other fixed costs are an extremely important element of it. So that is the cost side. But then I wouldn't -- I'd be remiss for not talking about the revenue side. When you look at small cars and also CUVs, coming out with a clear point of view on design, if you do it right and it is authentic and in line with the brand, you can drive revenue. So it is a matter of going after the cost piece and the revenue piece as we look at the entire lineup, including CUVs and then looking at the smaller cars --.

Then just one last question on the headcount reduction, how much faster has that been -- natural attrition would have been otherwise and what is natural attrition running at right now or in the past few years?

Well the rates of attrition vary by country and they run in the 4 to 5% overall. And I would say that the headcount reduction is about half -- in broad terms about half induced and about half natural attrition.

Let's take another question from the phone please.

Brett Hoselton, KeyBanc Capital.

I have two questions for you. First of all, with your supplier partner strategy and I know this is going to be a very specific question but what are you going to do when you know that your partner supplier is charging you more money for a component than you can get that same part for from another nonpartner supplier? What do you plan to do? Normally you would just resource it to that other supplier. What are your choices now?

A large part of our aligned business framework is a new relationship that is much more open and transparent and it is a sharing of data around the product, around the cost elements and our emphasis will not so much be on the prices but on what is the waste in the system. In any one of our processes, in any one of our supplier processes, there are inherently large wastes. We will be focusing on with our supplier is how can we eliminate that waste, be it bureaucratic drag in doing business with Ford Motor Company, be it waste in motion in a plant, be it waste in a Ford plant on how to improve that. Those transparencies in my view will yield substantial savings and in this aligned business framework, there is a relationship that assures that there will be long-term business involved, not just the quote of the day that will drive the business. That is a fundamental different change. When we do that, we will get more commitment. We will get more innovation. We will get better quality and over time, will get better cost from our suppliers. And that's exactly the way we're heading.

Then Mark, a question for yourself. As you've talked about the future of the different brands here in North America and you have talked about bold designs. I guess my question is what would be the one or two or maybe even three different examples of vehicles that you look at in your North American product lineup today or maybe onces that are now coming out that you would say this is representative of the bold designs you can expect from Ford going forward?

I think I can point to two in particular, well actually three. The Mustang -- if you look at the Mustang, first off, you know unmistakably it's a Ford. Secondly, when you get in the vehicle, you know inherently that it has come from an American car maker as opposed to a Swedish car maker, as opposed to a German car maker. The Ford Fusion in terms of its design both from all angles of the vehicle, the front end has a very strong [freight] that gives you presence on the road whether you are on the highway and viewing the vehicle from behind. It is that strong presence that again connotes that it is a Ford, unmistakably a Ford and unmistakably an American car. And then clearly what we showed at the Detroit Motor Show last week, the new Ford Edge, which we will be introducing later this year, we feel is a good embodiment in terms of where we're heading because in the crossover segment in my personal opinion, there isn't a lot of design differentiation along the crossovers and we think the Ford Edge will help do that but very importantly build on the Mustang and build on the Ford Fusion.

Before we switch to the media, let's take one more investor question here in the room.

Chris Ceraso from Credit Suisse. I have a few questions. First, this gets back to the question about how many employees are coming out, how much is attrition. How many folks do you think end up in the jobs bank throughout this process and is that baked into your $6 billion cost reduction target?

Well we won't get into specifics about what our labor assumptions are in the plan but what I can say when you look at GEN, it's too early to tell because there are a number of things that go into how many people go into GEN versus not. Obviously there is natural attrition and that takes place. There are placements where we place people in other plants. There are other means and there is also buyouts as well, central buyouts. So from a GEN standpoint, as usual what we will do is we will continue to comanage it in conjunction in working with our UAW partners.

Getting back to your comments about new thinking versus old thinking. If I look at some of the products that are about to come out from Ford, Lincoln and Mercury, it still looks like a lot of badge engineering going on, which to me sounds kind of like old thinking. What is the game plan going forward to truly differentiate the Mercury and Lincoln brands to try to build those brands back up?

Well I have a different viewpoint in terms of the new products that we have coming out. I think that they do have good and very unmistakable [views] for the brand. But very clearly -- what Peter Horbury and the design team have is a very clear assignment to make sure that in the Ford, Lincoln and Mercury brands that for each one there is a design theme and a design philosophy that the engineers can go off and execute on very, very consistently product after product. That doesn't mean that each vehicle is going to look exactly the same but from 100 yards away when you see a vehicle in a street, you will be able to say, that is a Ford or that is a Mercury or that is a Lincoln. And that is through the design philosophy that Peter and his team have developed. I think he calls them hieroglyphics but it is the shape of the front grill. It's the stance of the shoulder on the vehicle, etc.

I do have a comment on that because I think the best example of differentiation that we've been able to accomplish goes back to our C1 technology where the focus in Europe is clearly differentiated from the Volvo S40, is clearly differentiated from the Mazda 3, is clearly differentiated from the Mazda 5. I think it is very, very clear that by maintaining common underpinnings that are transparent to the customer, we can deliver unique characteristics that are true to the brand essence for Volvo, for Mazda, for Ford and at the same time, get economies of scale and sharing that saves us quite a bit in engineering, saves us in investment and saves us in piece costs. So that is the type of thing to look at and when you go to the Detroit show or the next show, take a look at the different products and ask yourself does that Volvo look anything like a Focus? No, it does not. It looks like a Volvo.

I think we're going to move over to the media for just a bit and in the interest of everybody, both here in the room and on the phone, there's a lot of people with their hands up. We're going to ask people to limit their questions to one question and one follow-up. That would be great.

Jim Hall, Auto Pacific. A question for Mark --.

Could you stand --.

I am standing.

I'm sorry. I couldn't see you.

You should be getting glare off the top of my head. In your presentation, Mark, you had mentioned a lifecycle reduction to 3.8 years for something and I was unclear exactly on what it is. Is that between a freshening or the equivalent of a major or an all-new?

Yes to all. What I said was we were going to reduce from about 4.4 years today to about 3.2 by 2008 and it's major freshening.

Major freshening. Okay. Thank you.

[Greg Popham], Detroit News. Bill, can you talk a little bit about how the Piquette project is going to factor into this new innovative strategy that you are trying to roll out?

In some ways the Piquette project was a traditional Ford project. It would remain its [concourse]. But to me, it is the leading edge of where we're headed as a company. It's bringing together our best and brightest minds and applying them truly with a clean sheet of paper saying what will the transportation needs of the future be? How do we not only anticipate them to get ahead of them and then how do we turn that into a commercial prospect. And so as I said, if this was several years ago, the Piquette project would have been something that would have been an interesting skunk works project off to the side that may or may not have ever seen the light of day within the mainstream. For me, it really is how we bring innovation right into the heart of the company.

Innovation has to really be all about the product and the way you make the product and the Piquette project does that. It's a proprietary thing. I don't want to go into a lot of details about what is in the Piquette project but suffice it to say this, it is very, very emblematic of where this company is headed and the kind of creativity and enthusiasm that we plan to unleash throughout the company.

[Bernhard Simon] from the Financial Times. Could I ask you about the new low-cost manufacturing plant that you mentioned earlier? What do you feel the need to build one? How much is it going to cost? What do you expect you are going to produce there and would you consider making it a non-union operation?

What I will tell you I'm not going to -- I'll give you the details in terms of the criteria we're using. First off, the plant, as we mentioned, would be in North America. The key criteria of the plant is low cost, not necessarily geography. And clearly it is too early to answer some of the questions that you mentioned but at the appropriate time, we will share that information. But again, the key criteria is low cost, not necessarily geography, but in North America.

Why are you doing this?

Why? Well when you look at particularly -- as we look at our product portfolio -- over time, our product portfolio will evolve and shift based on our brand but also looking at consumer preferences, etc. As we look at that and we look at the economics of the business, we realize that again for just some of the segments that we need, we have to significantly change our cost structure. Part of that is a lot of the actions that we're taking today and as we look at the new low-cost assembly facilities, the key there is low cost.

Todd Lassa with Motor Trend. The one name brand that didn't come up at all in the presentation is the one brand that won't have any platform sharing or is losing platform sharing and that's Jaguar. Can you talk about the future of Jaguar?

We have a turnaround plan for Jaguar. Jaguar -- one of the things I hope you have seen at the auto show is the cars themselves look great. But we have got our work to do in terms of getting the business pace correct. We have been working hard at it. It is coming and I believe there is a very good future for Jaguar but we still have more work to do.

I think what you can look for in Jaguar is a lot more synergy with Land Rover. Take a look at the new V-8 gas engines in Land Rover and they will look a lot like the Jaguars only a little more low-end torque for that application. So you can see powerplants being commonized between Jaguar and Land Rover. You will also see electrical systems gravitate in that direction and what the teams have done between Jaguar and Land Rover has gone to a core engineering, a shared core engineering approach that will drive commonality, shared engineering resources and the like that will provide efficiencies over time.

Sarah Webster, Detroit Free Press. You said that you are going to eliminate 14 manufacturing facilities and you have only named three out of the seven assembly plants today. It seems to me that that is a surprising lack of detail considering you have been working on this the past few months and I wonder why you are waiting and when we will know and when workers will know what facilities will be closed?

Well clearly as you know we announced three today. We will be announcing two some time later this year in terms of determining which ones. There has been a lot of work that goes into obviously selecting a plant. Clearly, we weigh a lot of consideration and we are announcing the appropriate amount of details that we feel we can share with you today. We also know that this causes a stress for our employees and also the communities where we still yet to make a determination but our commitment is to make that determination as soon as possible and then work with the local communities to make that transition as smooth as possible. But clearly as we look at assembly facilities, there are a number of different factors that go into determining that and it runs the gamut from demand for the product, to the manufacturing flexibility in the plant, to the material logistics and how it is handled, to the overall operating costs and to the investment efficiency and we are working through those.

[Sharon Cardy] from USA Today. Mark, you talked a little bit about the Mercury strategy earlier today. How is that different from what you are already doing right now?

Well actually it is building upon what we're doing right now. A couple of years ago, the Mercury team took on the challenge about defining the Mercury brand more distinctly and you are seeing products like the Montego but also the Mariner as we talked about, the Mariner hybrid and the recent Milan. And the net of it there is that we are attracting a different type of customer to Mercury that is aligned with the attitudes and values of the brand as we laid it out. A couple of tidbits -- 50% of the Mariner customers are conquest customers form Ford Motor Company. These are customers who otherwise would not have purchased a Ford Motor Company product, nevertheless a Mercury product. And we are also -- we are getting a lot more women buyers than we would have in the Ford brand. So the simple answer is building upon what we have laid in the foundation over the last 18 to 24 months, which is more visual distinctiveness in the product, not necessarily a product attribute distinctiveness but visual from materials, colors, some sheet metal changes, at a glance changes, things of that nature.

Let's switch to the phone and take one media question from the phone.

[John O'Dell], Los Angeles Times.

Busy day today. Quick one on the realignment of product offerings. Mark I believe you started off -- or Bill started off commenting about the need to realign our product offering. Can you give as any guidance as to what specifically you're talking about?

As we said, as it becomes appropriate for us to share future product plans, we will. But I will say this and reinforce this. Again, over time, we are going to see our product portfolio shift and evolve based upon how we define the brands and where the customers are going, very importantly. At the same time, I think it is important to note that we have talked about CUVs, which we are acting on. We have talked about small cars and we think there might be a lot of opportunity for us there. But beyond that, John, I won't go into more detail and we will share that with you at the appropriate time.

Okay. And then one follow-up they are allowing me. As you get to the right size, as you reduce production capacity, as you reduce your manufacturing and salaried employment, what are you doing with your dealer volume or what are you planning to do with your dealer volume?

As I mentioned in my remarks, our dealer body is literally the envy of the industry. We have a very strong and very committed dealer network. There is actually a misconception kind of running around that is always quoted where verses some of our competitors we have in total less throughput than some of our competitors. In the aggregate, that is true. But if you look at for example our top 1200 dealers in the major metro market, we are just as competitive if not more the top at the list in terms of throughput. Where our throughput goes down is because we have such adequate coverage across the country in rural areas. Clearly the throughput in some of those markets are less. But nonetheless, our "Way Forward" plan is put together to deliver a very competitive and distinct product lineup that will allow our dealers to earn a good gross and a good profit because, as I've told our dealers, they are very important business partners and they have to be profitable just like us.

John, if I can follow up to your first question. We are already signaling where we are changing our product lineup. We're signaling with hybrids, biofuels and this whole notion of innovation as it pertains to safety. So think of it not just in terms of what segments are you getting into that you are not already into, although we're clearly doing that as well, but also how are you going to make every one of your products different and how are you going to shift your personality in the marketplace, what is going to make Ford Motor Company different than any other car company and that does not always mean going into whitespace segments because there are not that many of them frankly. If we find them, we're going to go there but we're going to shift our entire product lineup to reflect that.

One thing I was trying to get to you -- the leakers have been talking about --

Mark, there were a number of questions that got left out or are there waiting to be answered after your announcement today. Let me talk to a couple because you've answered a few of them or avoided a few. In terms of product segments, Bill, you're touching on going there but talk about some of the key segments you have to get to. Can you also talk about what sort of efficiencies you looked at? You're not just talking about cutting the months to new product but what are you talking about in terms of man hours, in terms of cost per product and so on?

Well in terms of your second half of your question, Paul, and I won't avoid this one is -- clearly part of it is, as I've said, looking at architectures and bringing down the investment costs and overall material costs. We've talked about material costs utilizing some of the enablers. We have thrown out the $6 billion net cost number by the end of the decade and that's going to be driven by enablers like (indiscernible), the commodity business plan, which is getting commonality not only across here in North America but also globally. We've talked about the aligned business framework, which will also allow suppliers to have one point of contact for engineering and our purchasing organization together. We actually have matched pairs who are responsible for certain commodities and when you talk to suppliers, they have told us very clearly, hey, we don't know who we should talk to. So now we have one team, one process and one objective. So that will drive the material cost piece of it.

Clearly as we look at our global product development system -- I talked about the time to market that we will be reducing by adopting this system. Clearly along with that and I won't go into detail here not only engineering efficiencies but time to market efficiencies. We're using more digital tools. Peter and his team are taking some of the best practices from Volvo as it pertains to digital modeling and things of that nature. So it is a whole host of things -- it is a whole recipe of items that are driving us toward more products and better products faster.

I think the single question I get -- and by the way I didn't identify myself before -- Paul Eisenstein, the CarConnection.com. The single question I get from all my different editors, the economists, NPR and others is what happens this time? You did a plan, which you said was going to pull it together in '02. How do you tell people now that didn't work? This one is. This one is going to work. No question.

Paul, first of all, a lot of what we did in '02 did work. If you think of it we have got all our operations around the world with the exception of Jaguar back into profitability. We have gotten all the geographic regions back into profitability, including a major turnaround in For of Europe. Ford Credit went from being teetering on the brink of disaster to a very healthy enterprise in a very difficult environment. We restocked the product pipeline, which when we came in was less than full. So clearly as Mark indicated in his speech this morning, conditions changed. And one of the things that you'll recall that I said even back in 2002 is no plan can be a static plan because the world does change. And while -- what we did around the rest of the world and at Ford Credit stuck and worked largely, we have more work to do here in this market. And therefore the "Way Forward" plan, Mark and his team came up with it and it does respond to a new reality that we find ourselves in that we could not have anticipated back in '02 and I would say this is not a static plan.

Now don't imply that there is another shoe to drop because there isn't. This is our plan. However, any plan would be -- I think it would be absolutely irresponsible to say it is cast in stone and we're going to make no further adjustments to it. Guess what, the world doesn't work that way. We will be reviewing this monthly and sometimes more frequently with our board and certainly daily with each other.

Tom Walsh, from the Detroit Free Press. On the product portfolio, again, just sort of a little twist. Number one, will you continue to make minivans and number two, to go back to that suggestion that you want to play more in the small car and small CUV thus perhaps the need for that low cost new plant, that sounds kind of a lot of like what GM did with Saturn 25 years ago where it said we want to show America can make a small car and compete. It sounds -- why is this different?

Well I'm not going to comment on my competitors' strategy. The only thing I can tell you is that we have to make this work for Ford and very importantly make sure we have a clear point of view on the Ford brand, a clear point of view on the product philosophy and the design philosophy that delivers that and that is what will drive our business.

In terms of the minivans, we're going to have a 2007 Freestar and, as I said, as we look at our product portfolio, it will evolve and it will shift and it is going to be based on again as putting the rudder in the ship on what does our brand stand for and then we will follow where the market trends go and in some cases, we will lead the trend, which has been at times in our past successful and other times, we have not.

We have got about fifteen minutes left so now we're going to mix it up. Anybody can ask, media or investment community. We did have some weather problems in New York this morning and there were a lot of people from the investment community who were not able to make it. So I would like to take the next question from the phone please.

Ron Tadross, Banc of America Securities.

Thanks. Can you hear me okay? You know the plan seems to outline about one plant closure per year, 5000 people per year coming out of the Company, about $1 billion to $1.5 billion of material cost reductions a year. If I look back, this is pretty much what you guys have done over the past few years and this material cost reductions are in line with what everyone else is the industry is doing. I think that's why price is going down. So I'm wondering why you think this plan is more aggressive than in the past?

Well, I think as I mentioned in my speech, this plan in terms of the capacity when we look at fixed cost and capacity, is very front-loaded. We are going to take out 1.2 million units by 2008, and so I think that is somewhat more aggressive than the previous plan. I also think secondarily when you look at the overall costs, which we won't get into specifics of the calendarization of those costs, clearly we have done a lot of benchmarking versus our competition; not only what our gap is today or our competitive position is today, but where we think the competition is going to be by the end of the decade. We have done a tremendous amount of benchmarking on this.

Now, when we talk about our material costs, we feel by the end of the period we will be very competitive with the best in the business. And again, that's matched with making sure that we are just as competitive on the revenue side through delivering great and appealing products.

I guess if you look at other companies, though, I mean especially the Japanese manufacturers, they are taking 1.5 billion out a year also of material costs, and they are lowering prices on a real basis. Why shouldn't you guys have to do the same?

Well as I said, we've done a lot of benchmarking versus the Japanese competition. I mean, hey, I ran a Japanese car company for a number of years so I think that I have an idea of how they go about doing their cost reductions and the timing that they have. But our teams have done a lot of benchmarking on this and we feel that we will be very competitive by the end of the period.

Let's come back and take a couple more questions from the audience right here.

Mark, I want you to help me. I talked to Brian Johnson over at (indiscernible). He said the 1.2 million by '08 is sufficient to get you to 100% capacity utilization. If that's the case why do you need to close former plants down there? I mean are you talking about a Ford Motor Company that is smaller?

In terms of -- beyond that, I think this plan is very front-loaded but as I mentioned, we are going to be opening a new low-cost location, which will add some capacity. So towards the back end of the plan we will make some adjustments when it comes to our current capacities that we have and capacities coming online.

Could you wait for a mic please?

So one new factory is going to take the place of four that you're going to close? I'm just having trouble with the math.

Well as I said, we're not having trouble with the math internally and in some cases, we're not going to be sharing some of the level of detail that I think you would like us to but needless to say the math does work.

Well I think in terms of also flexible manufacturing, we don't need a dedicated plant for one model. That business model was yesterday's thinking and so you can't just take away some, add one more and say okay the net is three. Because it is a very different mix among our facilities then you would have traditionally seen.

Paul Herdtner from Fox here in Detroit. A question about the plant closings. I saw through 2012 is the end date for the closings. When is the earliest we will start to see some of the job cuts? My focus obviously locally being on Wixom and also what happens to the products made at Wixom?

Well I think you'll see the St. Louis plant will be the first to have some -- will be idling, will have the idling towards the end of the first quarter. Wixom, you will see that most likely in the second quarter of 2007.

-- productline. Vehicles of GT, the LS --?

On the GT, that has been a great success for us and we will share in the near future what our plans are for the GT as well as for the LS.

Anne Thompson from NBC. Mr. Ford, I just get this feeling that the Company has been down this road before. You've announced plant closings and job cuts. You've talked about customer focus before and bold design. And yet sales continue to decline and marketshare continues to shrink. So how will this time be different?

Anne, I think this is different in several respects. First of all, this in many ways was a clean sheet of paper. Mark mentioned that in his remarks. We asked the team to not be constrained by 100 year old infrastructure and say to them what will it take for us to succeed in the future. So you've never seen this level of cuts taking place. You've not seen this level of innovation taking place and that's a very aspect of this because one of the things that was increasingly clear to all of us is this a very crowded marketplace and the ability to differentiate your company from anybody elses is getting tougher and tougher as the years go by. And so having -- there are really two elements to this.

One is the innovation element, which ultimately ends up on the revenue side of the equation. The other is getting the business structure right so that we can compete in every segment of every market that we play in. What gives us confidence that this will work is it has worked in Ford of Europe, it's worked in Mazda, it's worked in South America. We have turned around our major operations and it's working at Land Rover as we're sitting here. We have turned around our major operations. We know what to do. Every market of course is different and this being such a big market and such a crowded market, the recipe isn't always exactly the same but a lot of the elements are and a lot of the levers we're pulling are levers that we've pulled before and we know they work.

But what is different though is the innovation emphasis because, as I look to the future, I lose a lot of sleep at night wondering what will set us apart and if you think of the Ford Motor Company, innovation really has been our history. It's something we've always been able to hang our hat on going back to the founding of the Ford Motor Company. That emphasis is very different than anything you've seen from us before.

(inaudible question - microphone inaccessible)

Actually Anne, it won't take awhile to translate to the marketplace. What's interesting is and what was great about the innovation [thrust] is it already existed in the Company. It just was disparate efforts that weren't well-coordinated. People weren't being compensated for it. They weren't being measured for it. But it was there and there was a real -- it was there in pockets throughout the Company. It was in our research lab. It was in Volvo safety engineering. It was in our hybrid growth. You're seeing a lot of it start to happen right now in some of the examples we've talked about this morning whether they were safety features or environmental features or things like the Rouge assembly plant. Very innovative but what is different is they can't be [one up]. They have to be the rule not the exception. So it's our job as management to harness that creativity, to give it a focus and give it a direction and then ultimately let it go into the marketplace and no, there will not be a big lag time because already so much of this is on the shelf.

[Chris Dunball] from Colorado (indiscernible). One of the sides of your business that we haven't heard very much about today is Ford Motor Credit. Without an investment grade rating, which very shortly may become a competitive disadvantage to you, where is Ford Credit going in the "Way Forward"?

Well, Ford Credit is an important piece of this Company. It's been an important profit driver. It's been important for customer satisfaction and customer loyalty. Ford Credit is very well run. Interestingly, they have been able to fund themselves in an environment that really -- they have been trading as noninvestment grade for some time. But several things have happened. They shrunk their balance sheet. They've really focused on the core business and they have been very, very opportunistic in terms of funding themselves as they look to the future.

We do have to get our credit rating up in the Ford Motor Company and when the "Way Forward" plan starts to get traction and our other operations around the world continue to improve, we will get our credit ratings back up and it's important not just for the credit company but for the entire company. Don, I don't know if you want to add anything to that or --.

That's very well summarized.

Even though interest rates have gone up over the last year, access to the credit market has been very easy for below investment grade credit. The spreads between below investment grade and investment grade has narrowed over the last year. Once the credit market gets tight and below investment grade credits have tougher access to the credits, do you have a strategic plan to go forward with that?

Well, right now, as Bill was saying, our plan is to hold with the credit company and continue to do what we've been doing. We have a lot of cash there. We have a funding plan that carries us as far out as we think makes sense. And you're right. Clearly in the long term, we need an investment grade credit rating to continue at the scale and scope we have. We think with the plan that we have for the auto side we'll get that. And for us, it's more important to try and hold on to where we are and to get the real synergies are having the credit company and the sales and marketing groups work together and that's our focus.

I think we have time for one more question. Let's go over here to the left side.

[Bill Cuttig] with Bloomberg. One part of today's (indiscernible) was cutting the number of corporate officers by 12%. Back in 2002, you told employees you were planning the same thing. I'm just wondering what took four years to get that done.

Well we've changed our structure throughout the Company in the last few years. We took a look at where we were now and said well if we're going to be cutting our overall salary employment, cutting hourly employment, we've got to take this action and we're going ahead and doing it.

One quick follow-up for something Don said near the end of his presentation. On that $1 billion -- now that's a possible charge you're still calculating what it will be and when to take it basically?

No, what I said was we can see right now about that much. Mark mentioned in his remarks just under $0.5 billion for separations and fixed asset charges and I said that we had probably an additional $0.5 billion for other separations, mainly Europe, but also in our automotive components holding. So that's kind of where we see things now. I mentioned that we are looking at the accounting for GEN costs because we do expect that we are going to be in a period where there will be more GEN costs than there have been in the past. So we're looking at that. We haven't -- there's still some work to do there.

Well, thank you all for coming. Obviously this is in some ways a very tough day for us as a company but it does mark I think a very important departure for us and it does give us a true way forward for our future and to win again in the marketplace and that's at the end of the day what this is all about. So stay tuned. I know you all are going to be watching us very closely as we go through this. Thank you for your patience and thank you for your questions.

And this concludes the 2006 business review for Ford Motor Company and we'll be hanging up the bridges and on the web. Thank you very much for participating.