福特汽車 (F) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ford Motor Company fourth-quarter earnings conference call.

My name is Katina and I will be your coordinator for today.

At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session towards the end of this presentation.

(Operator Instructions).

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr.

Bill Agne, Director of Investor Relations.

Please proceed.

Thank you, Katina, and good morning, ladies and gentlemen.

Welcome to all of you who are joining us by phone or webcast.

On behalf of the entire Ford management team, I would like to thank you for spending time with us this morning.

With me this morning are Alan Mulally, President and CEO, and Lewis Booth, Chief Financial Officer.

Also in the room are Peter Daniel, Senior Vice President and Controller; Neil Schloss, Vice President and Treasurer; Mark Kosman, Director of Accounting; and K.R.

Kent, Ford Credit CFO.

Before we begin, I would like to review a couple of quick items.

Copies of this morning's earning release and slides that we will be using today have been posted on Ford's investor and media websites for your reference.

Financial results discussed herein are presented on preliminary basis.

Final data will be included in our 2008 Form 10-K report.

Additionally, financial results presented here are on a GAAP basis and in some cases on a non-GAAP basis.

The non-GAAP financial measures discussed in this call are reconciled to their GAAP equivalents as part of the appendix to the slide deck.

Finally, today's presentation includes some forward-looking statements about our expectations for Ford's future performance.

Actual results could differ materially from those suggested by our comments here.

Additional information about the factors that could affect future results are summarized at the end of the presentation.

These risk factors are also detailed in our SEC filings including our annual, quarterly, and current reports to the SEC.

With that, I would like to turn the presentation over to Alan Mulally, Ford's President and CEO.

Thanks, Bill, and good morning to everyone.

As you all well know, in the fourth quarter we faced nearly unprecedented challenges across our global markets.

Demand weakened dramatically not only in North America but also in Europe and Asia.

The worldwide economic slowdown driven by tight credit markets and weak consumer confidence has shaken the foundation of even the strongest companies in the automotive sector and other industries.

Clearly at Ford the severe economic challenges had a significant impact on our fourth quarter results both in terms of our operating losses and our cash flow.

In response to these challenges, we took decisive actions and we saw many positive developments that made us confident that we are on the right plan, are taking the right actions to survive this global downturn and emerge as a lean globally integrated company poised for long-term profitable growth.

In these challenging times, we remain completely focused on our four-point plan, aggressively restructure the business, accelerate development of vehicles people want and need, finance our plan and improve our balance sheet, and work together as One Team, leveraging our global assets.

Customers are starting to see that Ford really is different not only because we continue to believe we are well positioned to survive this global downturn, but also because of the growing fuel efficiency, quality, safety, and smart technology we are engineering into every new vehicle.

I will start off today by providing you with an overview of last quarter's results and our recent product and business highlights.

Lewis Booth will take us through the details.

I will then summarize our plan going forward including our 2009 outlook.

This will include an update of the actions that we announced during the third quarter call to reduce our cost structure and improve cash.

We are also pursuing additional actions to further restructure our business and will be providing details of these at a later time.

Before I review last quarter's results, this morning we announced that we had provided notice to our banks to fully draw the $10.1 billion of available funds under our secured credit lines.

We took this action because of our growing concerns about the instability of the capital markets with the uncertain state of the global economy.

Lewis will cover this item in more detail during his portion of the call.

Also today we announced that the United Auto Workers Union has agreed to end the "jobs bank" at Ford known as the Job Security program.

The Company and the union are presently working out the details of the implementation.

Turning to slide three to review the key financial results of the quarter.

As shown at the top of the slide, vehicle wholesales last quarter were over 1.1 million units, down 505,000 from the same period in 2007.

Ford's fourth quarter revenue was $29.2 billion, a $16.3 billion decrease from a year ago.

The decrease is primarily explained by lower volume, the sale of Jaguar Land Rover, and exchange translation.

Ford's fourth-quarter pretax operating loss from continuing operations excluding special items was almost $3.7 billion, over a $3 billion decline from a year ago.

The decline included about $2.4 billion at Automotive and $653 million at Financial Services.

Our fourth-quarter net loss was almost $5.9 billion including about $1.4 billion of pretax special charges.

We ended the quarter with $13.4 billion of cash.

This was down about $21 billion from year-end 2007 levels, with almost $16 billion of that decline occurring during the first nine months of the year.

Turning to slide four, results at all operations were worse than last year because of the sharply lower industry volumes and our actions to reduce dealer stocks to keep them aligned with near-term demand expectations.

Fourth-quarter US industry volumes were down 35% from a year ago and our other major markets were down 12% to 27%.

Cost reductions provided a significant offset to these declines.

We reduced our automotive costs by over $1.4 billion compared to 2007, with $1.2 billion of that improvement occurring in North America.

Since 2005, Ford North America has reduced automotive costs by more than $5 billion, exceeding our target.

Ford North America incurred an operating loss of $1.9 billion, about $400 million decline from a year ago.

The decline was primarily explained by lower industry volume and lower dealer stocks, partially offset by significant cost reductions.

Ford's South America earned an operating profit of $105 million, a $313 million decrease from a year ago.

The decrease primarily reflects lower industry volume and higher material costs, partly offset by favorable net pricing.

Ford Europe incurred a $330 million operating loss, a $553 million decline from a year ago.

The decline was more than explained by lower industry volume, unfavorable exchange and lower dealer stocks, partly offset by cost reductions.

Volvo incurred a $736 million operating loss compared with a breakeven a year ago.

This decline primarily reflects lower industry volume, unfavorable net pricing, and unfavorable exchange.

Ford Asia-Pacific and Africa incurred an operating loss of $208 million, a $218 million decline from a year ago.

The decline primarily reflects lower industry volume again, unfavorable exchange, and adverse product mix.

We earned $79 million from our investment in Mazda and changes in our financial reporting for Mazda will be discussed on a later slide.

Financial Services incurred an operating loss of $384 million, a $653 million decline from a year ago.

The decline was primarily explained by higher provision for credit losses, market valuation adjustments to derivatives, and lower volume.

Turning to slide five, we are continuing our rollout of new products our customers want and value.

The new 2009 Ford F-150 full-size pickup truck was launched in North America and already has earned several prestigious awards including the North American Truck of the Year at the North American International Auto Show and Motor Trend's Truck of the Year.

The new F-150 has helped Ford gain market share in the full-sized segment in the fourth quarter and Ford's F-Series pickup finished 2008 as America's best-selling truck for 32 straight years.

The F-150 also was named Top Safety Pick by the US Insurance Institute for Highway Safety and Ford now has the highest number of IIHS Top Safety Picks ratings, 16, in the industry.

Ford brand also has more US government five-star safety rated vehicles than any other brand.

Production is underway for the 2010 Ford Fusion, Mercury Milan, and the Lincoln MKZ sedans, which go on sale this spring.

Both the gasoline-powered and hybrid versions of the Fusion and Milan will offer the best-in-class fuel economy when they hit showrooms this spring.

The Fusion and Milan hybrids achieve 41 miles per gallon in city driving, making it America's most fuel-efficient midsized sedan.

The 2010 Ford Mustang, America's favorite muscle car, debuted with an all-new look and will be in dealerships in a couple of months.

We also announced an aggressive new electric vehicle plan that will bring to market new battery electric vehicles, hybrids, and plug-in hybrids during the next four years.

In Europe, Ford reached full production of the new Ka and is off to a strong sales start.

The new Ford Fiesta, named "Car of the Year" by What Car?

magazine, Britain's leading source of new car advice, Fiesta was the best-selling model in the UK in November and December and is already the second best-selling Ford model in all of Europe.

Ford Galaxy and the Ford S-MAX, both named number one for reliability among multi-activity vehicles by German vehicle testing agencies, DEKRA.

Volvo launched the new XC60 in Europe and the highly acclaimed crossover will reach US showrooms this spring.

Slide six details some of our key business highlights of the fourth quarter.

In November, we began the evaluation of our strategic options for Volvo Cars including their possible sale.

We expect the review to take some time and we won't have additional details to share today.

In the meantime, Volvo is continuing to implement an aggressive restructuring plan and substantially implemented its global personnel reduction of around 25% by the end of the quarter.

We sold a portion of our ownership stake in Mazda for around $530 million, while continuing our successful 30-year strategic partnership with Mazda through our ongoing joint ventures as well as sharing our platforms and powertrains.

Our alliance is one of the most successful in the automobile industry.

We ended large SUV production at the Michigan Truck Plant, which will be one of three plants we are retooling to make small fuel-efficient cars beginning in 2010 as part of our global product transformation.

In the US, the Ford, Lincoln, and Mercury brands collectively increased market share all three months in the fourth quarter compared to the prior year.

This was the first time we have achieved three consecutive months of US market share gains in 12 years.

And based on preliminary sales data, we are poised to make it four months in a row when we report January sales results next Tuesday.

Ford Europe improved its fourth-quarter and full-year market share in the 19 markets we track and became Europe's number two overall selling brand.

Europe's performance was boosted by the strong sale start for our new global Fiesta car.

We maintained sufficient liquidity and did not need to access government bridge loans.

Ford also defined its plans to the US Department of Energy to invest about $14 billion over seven years to produce advanced fuel-efficient vehicles.

This could allow Ford to qualify for up to $5 billion of direct loans by 2011.

Similar actions are being taken with the European investment bank.

Now I will turn it over to Lewis to provide more details on our fourth-quarter financials.

Lewis?

Thanks, Alan.

Let's move on to slide eight, which provides more information on our results.

Starting at the lower left, our net loss for the fourth quarter was about $5.9 billion and our net loss included minority interest in the affiliates.

This net loss also included $874 million of tax expense, more than explained by a reversal of tax benefits recognized earlier in the year for Accounting Standard FAS 109 related to our deferred tax valuation allowance.

This is consistent with the guidance we provided during last quarter's call.

Adjusted for these items, leaves a fourth-quarter pretax loss of over $5 billion.

These results include pretax charges for special items of about $1.4 billion, which we will cover on the next slide.

Excluding these special items, we recorded a fourth-quarter pretax operating loss of almost $3.7 billion.

Most of the remaining slides will focus on these pretax operating results.

Slide nine covers special items, which were about $1.4 billion in the fourth quarter.

In North America, we recorded a charge of $229 million largely related to hourly personnel reduction programs in the US.

International operations incurred $280 million of charges related to personnel reduction programs primarily related to implantation of Volvo's and Asia Pacific's restructuring plans.

We recognized a gain of $82 million due to the planned reductions in the number of employees in the Job Security Benefits reserve primarily due to the utilization of these employees at other plant locations.

We recorded a charge of $224 million for accelerated depreciation related to a lease buyout with our AAI facility and we recognized a $201 million loss on the sale of a portion of our investment in Mazda.

In addition, we incurred supplier settlements and other costs of $209 million.

Finally, we recorded $356 million of retiree healthcare charges related to the VEBA agreement with the UAW primarily reflecting losses on the Temporary Asset Account.

These losses will be reversed upon transfer of the TAA to the new independent VEBA.

Now on to slide 10, which shows our pretax operating results by sector.

The fourth-quarter pretax operating results were a loss of almost $3.7 billion.

These results included a loss of about $3.3 billion for the Automotive sector and a loss of $384 million in Financial Services.

The total Company full-year pretax operating results were a loss of $6.7 billion and these results included losses of $6.2 billion for the Automotive sector and $495 million for Financial Services.

Let's move on to slide 11, which shows pretax operating results for each of our Automotive operating segments and Other Automotive.

We will focus here on Other Automotive and then cover the operations in detail on the next slides.

In the fourth quarter, Other Automotive was a loss of $330 million.

This loss was more than explained by net interest expense of $448 million, partly offset by favorable fair market value adjustments of $118 million primarily related to the impact of changes in the exchange rates on intercompany loans.

Slide 12 shows a change in fourth-quarter results compared with a year ago, a decline of $2.4 billion.

The comparison with full-year results is shown in the memo.

Volume and mix was about $2.8 billion unfavorable primarily due to a decline in industry volumes and the impact of lower dealer stocks across all of the Automotive operations, partly offset by market share improvements.

Net pricing was about $200 million unfavorable, explained by decline in Volvo and in North America offset partly by improvements in Europe and South America.

Cost changes were over $1.4 billion favorable in the fourth quarter and $4.4 billion favorable in the full year and we will cover this on the next slide.

Exchange was about $100 million unfavorable, more than explained by unfavorable exchange in Europe from Volvo, partly offset by favorable exchange in North America.

Net interest and related fair market value adjustments were $200 million unfavorable, primarily due to lower cash balances and lower interest income rates.

And the non-recurrence of Jaguar Land Rover profits in 2007 also adversely affected the year-over-year profit comparison by about $60 million.

Finally, included in the other decline of $400 million, our lower subsidiary and parts profits largely related to the decline in volumes.

Now on to slide 13, which explains our cost reductions of $4.4 billion compared to a year ago.

The fourth-quarter cost reductions were over $1.4 billion favorable.

Full-year net product costs were over $1.1 billion higher than the year ago and fourth quarter net product costs were up about $800 million.

Both increases were more than explained by higher commodity costs and unfavorable mark-to-market adjustments on commodity hedges.

Warranty expense was over $100 million lower as a result of improved quality.

The manufacturing and engineering costs were over $1.5 billion lower largely reflecting the continued benefit of our restructuring actions in North America.

Spending-related costs improved by about $1.3 billion primarily reflecting lower expense related to the North American asset impairment at the end of the second quarter and the non-recurrence of accelerated depreciation and amortization for facilities that we recently closed.

Pension and retiree healthcare expenses were about $1.2 billion lower primarily reflecting healthcare efficiencies and the effect of the US hourly retiree healthcare VEBA agreement.

Overhead costs were over $1 billion lower primarily due to our restructuring actions.

And advertising and sales promotions were about $400 million lower than the year ago.

Over the next section of slides, we will cover each of the Automotive operations starting with North America on slide 14.

In the fourth quarter, wholesales were 484,000 units, down 197,000 units from a year ago primarily reflecting the 35% decline in the US industry SAAR from 16.3 million units in fourth quarter 2007 to 10.6 million units in the fourth quarter 2008.

During the fourth quarter, we also took actions to reduce US dealer stocks by 36,000 units.

At year-end, our US dealer stocks were reduced by over 90,000 units or 17% from a year ago.

As a result of our actions to keep production aligned with sales expectations, Ford was one of the few OEMs to reduce dealer inventory during the fourth quarter.

We have amongst the lowest days supply in the industry.

Fourth-quarter revenue was $11.3 billion, a $6 billion decrease from a year ago primarily explained by lower volumes and unfavorable model mix.

For the fourth quarter, Ford North America reported a pretax loss of about $1.9 billion, a $313 million decline from a year ago.

I will cover this change on the next slide.

So slide 15 provides an explanation of the change in North American results compared to the year ago.

Volume and mix was about $1.6 billion unfavorable, primarily reflecting a decline in US industry volumes, lower dealer stocks and unfavorable production mix, partly offset by higher market share.

Our production mix was about $300 million worse than our mix of vehicles sold to final customers due to stock reductions on pickup trucks and large SUVs.

Directionally, our losses would have been about $600 million lower if our production had been equal to our retail sales.

Net pricing was about $200 million unfavorable, more than explained by higher retail incentives.

And costs decreased by $1.2 billion, more than explained by lower structural costs including lower manufacturing and engineering, pensions and OPEB, spending-related costs, and overhead.

The structural cost reductions were partly offset by higher commodity costs and product content.

Exchange was $300 million favorable, consistent with the strengthening of the US dollar relative to the Canadian dollar and the Mexican peso.

Slide 16 provides an explanation of the improvement in North America's fourth-quarter results compared with the third quarter.

Volume and mix was $500 million favorable, primarily reflecting the improvement in our US market share from 12.4% to 15%.

Dealer stock reductions that were lower than the third quarter reductions and favorable mix partly offset by a decline in the US industry SAAR from 13.1 million units to 10.6 million units.

Net pricing was $200 million favorable, consistent with higher net pricing on 2009 models.

And costs increased by $100 million, more than explained by increased recognition of manufacturing costs as inventories are reduced and by higher advertising costs.

Exchange was $200 million favorable, consistent with the strengthening of the US dollar relative to the Canadian dollar and the Mexican peso.

So slide 17 shows US market share for Ford and Lincoln Mercury.

In the fourth quarter, our market share was 15%, including 10% -- sorry -- including 10.7% for retail and 4.3% for fleet.

This was the first time in 12 years that we improved our overall and retail market share in three consecutive months.

Retail market share improved by 0.9% compared with last year and this increase is more than explained by higher F-Series and Fusion shares and the introduction of the all-new Lincoln MKS and the Ford Flex.

Fleet share remained flat at 4.3% compared with last year.

Slide 18 provides a summary of cost reductions in North America.

In the fourth quarter, operating-related cost reductions totaled $1.2 billion compared with the year ago.

Net product costs were about $500 million unfavorable, more than explained by higher commodity costs and product content, partly offset by material cost reductions.

Structural and other cost reductions totaled $1.7 billion in the fourth quarter compared with the year ago.

This reduction includes about $250 million of reduced depreciation from the fixed asset impairment in the second quarter.

We exceeded our $5 billion cost reduction target compared to 2005 by about $100 million, excluding the favorable impact of lower depreciation related to the impairment.

Hourly and salaried personnel in North America totaled 75,000 people at the end of the fourth quarter, down 5,000 personnel from the end of the third quarter.

In addition during January, we further reduced our salaried employment levels by about another 1,300 people.

Now onto South America on slide 19.

In the fourth quarter, wholesales were 97,000 units, down 29,000 units from a year ago, primarily reflecting the 27% decline in industry SAAR from 4.5 million units in the fourth quarter 2007 to 3.3 million units in the fourth quarter of 2008.

This decline is largely related to the global financial crisis that began to impact South America during the fourth quarter.

Fourth quarter revenue was $1.7 billion, a $700 million decrease from a year ago primarily reflecting lower volumes and weaker Brazilian currency, partly offset by favorable net pricing.

For the fourth quarter, Ford South America earned a pretax profit of $105 million, a $313 million decrease from a year ago.

This decrease primarily reflects the lower industry volume and the higher net product costs, partly offset by favorable net marketing -- sorry -- favorable net pricing.

Slide 20 covers Ford Europe.

In the fourth quarter, wholesales were 378,000 units, down 109,000 units from a year ago.

Fourth-quarter industry SAAR for the 19 markets that we track was 14.8 million units, down 3.5 million units or 19% from a year ago.

In addition, the Russian industry SAAR was 2.7 million units, down 300,000 units or 10% from a year ago.

The fourth-quarter market share with 8.5%, up 0.3 points from last year.

For the full year, market share was up in most of the major markets that we track, but adverse country mix limited the full-year improvement to 0.1%.

In the fourth quarter, revenue was $7.6 billion, a $2.8 billion decrease from a year ago primarily due to lower volume and unfavorable currency translation, partly offset by favorable mix.

For the fourth quarter, Ford of Europe reported a pretax loss of $330 million, a $553 million decline from a year ago.

We will cover this change on the next slide.

Slide 21 provides an explanation of the change in Ford Europe results compared to a year ago.

Volume and mix was $500 million unfavorable, more than explained by the decline in industry volume and lower dealer stocks partially offset by improved market share.

The industry volume decline reflects the significant economic weakening in almost all European markets.

Net pricing was $100 million favorable compared to a year ago.

This reflects favorable vehicle pricing primarily in Britain and Germany in part to offset unfavorable currency exchange effects.

Costs decreased by $200 million, reflecting lower warranty costs driven by continued progress in quality, lower manufacturing engineering costs to align capacity with demand, and reduction in pension costs partly offset by higher commodity costs.

Exchange was about $200 million unfavorable, mainly due to the weakening of the British pound and the Russian ruble compared to the euro.

Other was $100 million unfavorable, primarily explained by lower earnings at our joint ventures due to lower industry volumes.

Slide 22 covers Volvo.

In the fourth quarter, wholesales were at 80,000 units, down 47,000 units from a year ago.

This reduction is explained by the sharply lower industry volumes primarily in the UK and Europe as described earlier and reduction in market share.

Fourth-quarter revenue was $3.3 billion, a $1.8 billion decrease from a year ago primarily explained by lower volumes, unfavorable net pricing and unfavorable currency translation.

In the fourth quarter, Volvo reported a pretax loss of $736 million compared with breakeven a year ago.

We will cover this decline on the next slide.

Slide 23 provides an explanation of the change in Volvo's results compared to a year ago.

Volume and mix was $500 million unfavorable primarily reflecting lower industry volume and market share.

Net pricing was $200 million unfavorable compared to a year ago, primarily reflecting increased incentive spending in Europe and Russia and lower residual values in the US.

Costs decreased by over $100 million largely explained by actions taken to reduce structural costs.

Our exchange was about $100 million unfavorable.

During 2008, Volvo initiated restructuring actions to reduce total personnel levels by 6000 people or around 25%.

These actions were largely implemented by the end of the fourth quarter.

Now on to slide 24, which covers Asia Pacific, Africa, and Mazda.

Overall fourth-quarter losses were $129 million and full-year profits were $77 million.

For the fourth quarter, we earned $79 million from our investment in Mazda, a $4 million increase from a year ago.

This is the last quarter we will be reporting our share of Mazda profits.

As a result of reducing our ownership interest in Mazda from over 33% to about 14%, our remaining investment will be treated as a marketable security in our investment portfolio.

This investment will be revalued quarterly to reflect share price changes in US dollars.

So slide 25 covers Asia-Pacific and Africa.

In the fourth quarter, wholesales were 99,000 units, a decrease of 46,000 units compared to 2007 primarily reflecting industry weakness in both markets and lower dealer stocks.

The fourth-quarter industry SAAR was 17.9 million units, down 2.4 million units or 12% from a year ago.

And our fourth-quarter revenue which excludes sales at our joint ventures in China, was $1.4 billion, a $300 million decrease from a year ago more than explained by lower volume and unfavorable currency translation.

For the fourth quarter, Asia-Pacific and Africa reported a pretax loss of $208 million, a $218 million decline from a year ago.

This decline primarily reflects lower industry volumes, unfavorable exchange, adverse product mix and higher incentives, partly offset by cost reductions.

Slide 26 shows automotive cash and cash flow.

We ended the fourth quarter with $13.4 billion in gross cash, down $5.5 billion from the third quarter.

Our operating-related cash flow was $7.2 billion negative in the fourth quarter, reflecting an Automotive pretax loss of about $3.3 billion; capital spending during the quarter about $600 million higher than depreciation and amortization, primarily because of spending associated with the launch of the all-new F-150 and the impact of the second quarter asset impairment on depreciation and amortization.

It also reflects the changes in working capital and other timing differences that were $2.7 billion negative.

This is primarily explained by a reduction in trade payables of about $4 billion and other timing differences as a result of lower production at the end of the quarter.

Significant reductions in inventory and receivables were offsets to the lower payables and payments of $600 million to Ford Credit reflecting our change to upfront payment of subvention.

This outflow continues to be significantly impacted by declining global demand and actions we have taken to reduce dealer stocks by another 50,000 units compared with the third quarter to better align with future expectations.

Once volumes stabilize, payables will stop declining and generally will grow as volumes recover.

In addition, in part because of the major F-150 launch -- in part because the major F-150 launch will be behind us, we expect spending to decline in 2009.

Separation programs resulted in an outflow $200 million for the quarter and we contribute $100 million to our non-US pension plans.

We received a $1.3 billion tax-related payment from Ford Credit.

We also received about $500 million from divestitures, primarily the sale of our Mazda securities.

Including all of these impacts, the total decline in gross cash during the fourth quarter was $5.5 billion.

Slide 27 summarizes our automotive sector's net liquidity at December 31, 2008.

Total liquidity including available credit lines was $24 billion.

This liquidity includes $10.1 billion available under our secured credit lines and $500 million of other Automotive credit lines.

As Alan mentioned earlier, we provided notice today to our banks to fully draw our secured credit lines.

We took this action because of our growing concerns about the instability of the capital markets given the uncertain state of the global economy.

We believe that this is prudent to draw the secured credit lines in this environment.

The $10.1 billion will be added to our cash and included in our first-quarter balance sheet.

Under the terms of our credit agreements, we expect to receive funds from this borrowing next Tuesday, February 3.

At year-end, Automotive debt was $25.8 billion, of which less than $3 billion of the external debt matures in the next three years.

The Automotive debt excludes the impact of the secured credit line draw.

Also this month as permitted by the underlying agreement, Ford converted the Temporary Asset Account funds into a new Ford note payable at the end of this year.

This will provide the flexibility to utilize over $2 billion of funds to support operations if needed within the year.

As a result, this amount will improve liquidity and be included in gross cash starting this quarter.

Now let's turn to slide 28th and financial services.

For the fourth quarter, Financial Services sector reported a pretax loss of $384 million, a $653 million decline from a year ago.

For the full year, the pretax loss was $495 million, a $1.7 billion decline from a year ago.

Other Financial Services reported a loss of [$12 million) (corrected by company after the call) in the fourth quarter, an $18 million decline from a year ago.

For the full-year, pretax loss was $22 million, a $31 million decline from a year ago.

These declines primarily reflect non-recurrence of asset sales.

We will cover Ford Credit in more detail on the next slide.

Slide 29 explains the change in Ford Credit's pretax results from the fourth quarter compared with a year ago.

For the fourth quarter, the pretax loss was $372 million, a $635 million decline from a year ago.

The decrease in earnings primarily reflected the higher provision for credit losses, higher net losses related to market valuation adjustment for derivatives, lower volume, and lower financing margin.

Also lower operating costs were largely offset by other expenses.

The volume and financing margin were lower primarily reflecting declining asset levels in the fourth quarter of 2008.

The increase in the provision for credit losses primarily reflect higher severities, higher repossessions and the higher dealer-related losses in the US, and higher losses in Europe.

Residual losses were about the same in the fourth quarter 2008 compared with last year, while auction values have declined significantly from last year.

The fourth-quarter profit implication from these declines were mitigated by the second-quarter $2.1 billion lease impairment charge.

And we expect auction values to continue to be volatile.

As shown in the memo on the left -- on the lower left of the slide, Ford Credit's December 31, 2008 managed assets were $118 billion, about $29 billion lower than a year ago.

This decline primarily reflects lower North American receivables, changes in currency exchange rates, the impact of divestitures, and alternative business arrangements.

And the second quarter 2008 impairment charge for North American operating leases.

In addition, Ford Credit is restructuring its US operations to meet these changing business conditions including lower automotive sales and the planned reduction in Jaguar Land Rover and Mazda receivables and to maintain a competitive cost structure.

The restructuring will affect servicing, sales, and central operations and eliminate about 1,200 jobs and agency positions or about 20%.

The reductions will occur in 2009 through attrition, retirements, and involuntary separations.

Slide 30 covers the liquidity and funding outlook.

The left box shows Ford Credit's committed liquidity programs and cash and the utilization of liquidity sources at the end of the fourth quarter.

Ford Credit's liquidity exceeded utilization by about $21 billion.

Ford Credit's funding strategy remains centered on maintaining liquidity to meet short-term funding obligations including holding a substantial cash balance.

We are maintaining our funding programs and securitization structures so that we are ready to access public markets when they return.

We are planning to renew committed capacity throughout this year and we will utilize appropriate government-sponsored programs.

Until market access returns, utilization of government-sponsored programs in the US and around the world will be an important component of Ford Credit's short-term funding plans.

It has utilized the US Commercial Paper Funding Facility and the European Central Bank's liquidity facility and plans to use the US Term Asset-Backed Securities Loan Facility, the TALF, when launched later this quarter.

Gaining approval of our application for an Industrial Loan Corporation is a component of Ford Credit's funding plan as it will provide access to lower costs, diversified funding from certificates of deposit.

Ford Credit will continue to explore and execute alternative business and funding arrangements in those locations where it lacks diverse funding capabilities.

At the end of the fourth quarter, Ford Credit's managed leverage was 9.9 to 1 and Ford Credit's equity was $10.6 billion.

Finally, we will continue to reduce the size of our balance sheet in 2009, reflecting our strategy to focus on Ford brands and implement alternative business arrangements as well as lower overall automotive sales.

By the end of 2009, Ford Credit's managed receivables will be in the range of $90 billion to $100 billion.

Slide 31 provides an update on our pension plans.

Worldwide 2008 pension expense excluding special items were $500 million, down $300 million from 2007, primarily reflecting the ongoing impacts of separations and higher discount rates in 2008.

At year-end 2008, our US funded plans were underfunded by $4.1 billion and worldwide, our pension plans were underfunded by $11.9 billion, primarily reflecting the impact of lower asset returns in 2008.

We do not have a requirement to fund our major US pension plans in 2009.

Slide 32 provides an update on OPEB.

Worldwide OPEB expense excluding special items was $800 million, down $900 million from 2007 primarily reflecting healthcare efficiencies and the effect of the new UAW VEBA agreement.

Retiree benefit payments were $1.5 billion in 2008.

At year-end 2008, our OPEB plans had a funding shortfall of $16.3 billion, a $7.9 billion improvement from 2007.

The change in funded status primarily reflects the lower obligation from the new UAW VEBA agreement.

We have not shown cost trends this year because we have capped our obligation for hourly costs as a result of the UAW VEBA agreement and previously we had established a company contribution limit set at 2006 levels for the US salaried retiree healthcare benefits.

Now on to slide 33, which shows the results of our 2008 full-year planning assumptions and operational metrics.

Total industry volume for 2008 was 13.5 million units in the US and 16.6 million units in Europe, both down substantially from our planning assumptions.

On the operational metrics, the quality of our vehicles has risen consistently for four straight years and our vehicle satisfaction has reached an all-time high.

Ford, Lincoln, and Mercury vehicles collectively reduced things gone wrong, TGWs, by 7.7% compared to last year and TGW level is now at the lowest levels ever, statistically tied with the best Japanese brands.

Automotive costs were reduced by $4.4 billion, significantly better than planned.

And the US market share, which were 14.2% consistent with our plan but better than our recent expectations.

Absolute operating cash was $19.5 billion and this was higher than our plan.

And capital expenditure was $6.5 billion.

So slide 34 covers our 2009 first-quarter production plan.

In North America, first-quarter production schedule is 400,000 units, down 292,000 units from 2008 and 30,000 units lower than our prior guidance.

Most of the decline from last year is in trucks and SUVs.

For Ford Europe, we expect first-quarter production of 325,000 units, down 214,000 units from a year ago in part to further reduce dealer inventories.

And at Volvo, we expect first-quarter production of 67,000 units, down 45,000 units from a year ago.

Overall production is not down greatly compared to the fourth quarter because we've already taken decisive actions to implement significant stock reduction for the last half of 2008, bringing our US day supply down to a level 8% below the average industry.

Importantly, we're planning much of our downtime early in the first quarter to continue to rebalance dealer stocks.

In comparison, much of the fourth-quarter downtime occurred late in the quarter and this should result in our payables at the end of the first quarter being greater than our year-end levels, reducing cash burn during the quarter.

And now I'd like to turn it over to Alan to summarize our plans going forward including our 2009 outlook.

Thank you, Lewis.

On slide 36 we provide an overview of the business environment.

We expect weak volumes this year across all markets, with worldwide sales down over 10%, a record decline according to our data.

Most of the 2008 weakness outside of the US occurred late in the year.

Significant government policy stimulus has been implemented in most markets.

This is expected to improve the environment for sales later this year.

Financial markets remain under significance stress and further government and central bank actions to provide liquidity and stabilize banks are needed.

Our suppliers and dealers also have been weakened by the global economic downturn and financial crisis.

The decline in oil, fuel, and other raw materials prices will provide a partial offset to the weak demand conditions.

Currencies are very volatile, which poses some risk.

Of note is a substantial weakness in the British pound, Russian ruble devaluations, and some Asian currency weaknesses.

Slide 37 summarizes the key aspects of our plan.

These have not changed.

We are more focused than ever on implementing our transformation plan to respond to the significant challenges presented by the continuing global economic downturn and deliver longer term profitable growth.

We are glad that we went to the capital markets at the right time to obtain liquidity to finance our plan and that we sold non-core brands to raise further capital and allow further focus of our resources on Ford.

And I'm especially pleased with how the team is working together to create One Ford in leveraging our global resources.

Despite the present turbulence in the worldwide economies, I continue to believe that Ford is well positioned to take advantage of our scale and global product strengths.

With a balanced portfolio of highly acclaimed best-in-class vehicles and sharp focus on the Ford Blue Oval brand across the globe, we can effectively operate through the current downturn.

Going forward, this balanced portfolio will allow the flexibility to adapt more easily to changes in our environment and begin to grow profitably as the global economy rebounds.

On slide 38, as we have discussed on numerous occasions, despite the financial crisis our plan to invest in new smaller fuel-efficient vehicles and achieve a more balanced global product portfolio remains intact.

Our pipeline is full.

In combination with the business improvements being achieved, we expect our One Ford product development vision and process to deliver a broad range of highly acclaimed global vehicles in what we call the global segments, B, C, C/D, and Commercial Vans, beginning this year.

As indicated before, by 2010, about 40% of our entries in North America in these segments will be shared with the Ford of Europe platform and top hats with complete alignment of the lineup these segments share with Ford of Europe by 2013.

This compares with almost nothing in common today.

And every new product as evidenced by the Fusion will be the best or among the best in the segment for fuel economy as well as quality, safety, and value.

Our new products will be assembled in plants featuring lean manufacturing techniques and in nearly all facilities, flexible body shops that will make them competitive with the best in the business.

Importantly, longer term we expect to have our vehicle assembly capacity matched to the demand.

As we make these changes, we are also continuing to fix the fundamentals of the business as evidenced by our plan to reduce Automotive structural costs by about another $4 billion this year.

Moving to slide 39, based on our current planning assumptions, Ford has sufficient liquidity to make it through this global downturn and to maintain our product plans without the need for government bridge loans.

We would, however, require a government bridge loan if there is a significantly deeper economic downturn or a significant industry event such as a bankruptcy of a major competitor that causes disruption of the Company's supply base, dealers, or creditors.

We are on our way to delivering the $14 billion to $17 billion of Automotive cash improvement actions we defined in November.

These sections include reducing spending and inventories and achieving other working capital improvements; further reducing salaried personnel-related costs and achieving additional efficiencies in engineering, manufacturing, advertising, and information technology; releasing capital consistent with Ford Credit's smaller balance sheet and focus on Ford brands; developing incremental sources of funding including sale of other non-core assets.

In addition, we are pursuing other restructuring opportunities in conjunction with our various stakeholders and we will have more to discuss on this as they develop.

These restructuring opportunities are being pursued on a global basis with each business unit throughout the Ford world focused on restructuring its operations.

Ford remains on track for both its overall and its North American automotive pretax results to be breakeven or profitable in 2011 excluding special items.

Slide 40 summarizes our 2009 outlook, including our key automotive planning assumptions and operating metrics.

We are expecting total industry sales to be in the range of 11.5 million to 12.5 million units for the US and in the range of 12.5 million to 13.5 million units for Europe.

These estimates include both light and heavy vehicles.

On operational metrics, we will continue to improve our quality.

As mentioned previously, we will continue to reduce our Automotive structural costs by about another $4 billion during 2009.

We have focused this metric on the structural costs as these are the costs largely within our control.

While we will continue to pursue our material cost reduction initiatives, we recognize that commodity cost and related hedging gains and losses will continue to be very volatile.

On market share, we expect that both our total US share and our share of the US retail market will stabilize and improvements are possible with our new product lineup.

We have included the second share performance measurement, the US share of retail market, as this is the most important and traditionally the most profitable market segment in which we participate.

In this context, we are defining the US retail market as excluding all fleet sales including those to daily rental companies and governments.

For 2008, we estimate that we had about a 12.1% share of the US retail market.

We anticipate total Europe share to be about equal or improved as compared to 2008.

We continue to expect operating cash outflows in 2009, but these will be significantly less than those incurred in 2008.

This is based on industry volumes stabilizing early in the year and beginning to recover later in the year.

This should result in improvements in both payables and a number of other factors.

In addition, the outflows related to the acceleration of subvention payments to Ford Credit will decrease in 2009 and we will be realizing benefits from the actions initiated under our $14 billion to $17 billion cash improvement plan.

Further, we expect to receive funding from the Department of Energy, the European Investment Bank, and other sources in support of our investments to improve fuel efficiency and reduce CO2 emissions.

Finally, as indicated in November, capital spending will be in the range of $5 billion to $5.5 billion, down from $6.5 billion in 2008 as we completed spending on our new F-150 and realize even greater efficiencies from our One Ford global product development initiative.

Given the volatile nature of today's market, at this time we do not believe it would be prudent to provide any other further guidance on profitability for 2009.

Now on to slide 41.

Business conditions have deteriorated rapidly on a global scale, but our One Ford plan is more right than ever.

We are focused on swift and decisive actions to stay on course with the four elements of our plan.

We are working on longer-term restructuring actions on a global basis and managing all elements that we control to decisively respond to the changing economic conditions.

In the next year, our product offensive continues with the new Ford Mustang, the new Lincoln MKZ, freshened gas and new hybrid versions of both the Ford Fusion and Mercury Milan, the new Ford Taurus with EcoBoost engine, the Lincoln MKS and Ford Flex, both with EcoBoost engines, an entirely new type of small commercial van for this market called the Transit Connect, and the all-new Lincoln MKT three-row premium crossover.

In addition, Volvo is launching its XC60 crossover in Europe now and in the US market this spring.

A freshened S80 comes later this year.

These vehicles are built upon innovative new products that we introduced late last year such as the Ford F-150, the Ford Fiesta, Kuga, and the Ka.

In summary, these continue to be challenging days for the auto industry, yet I remain convinced that Ford is implementing the right plan.

I continue to believe that Ford is well positioned to take advantage of our scale and our product strengths worldwide.

Now we would like to take your questions.

Thank you, Alan.

Ladies and gentlemen, we are going to start the Q&A session now.

We have about 35 minutes for the Q&A, We will begin with questions from the investment community and then take questions from the media who are also on the call.

To allow as many questions as possible within our time frame, I ask that you to keep your questions brief so that we don't have to move callers along after a couple of minutes.

So with that, Katina, can we please have the first call, question?

(Operator Instructions) John Murphy, Merrill Lynch.

Good morning, guys.

I just wanted to ask a question about dealing with your constituents here.

I mean you have two weaker competitors, competitors who are not as well positioned, that are having very significant negotiations with labor at the UAW and with creditors.

And thinking that they might achieve something at some point in the future through various means, is this something that you are pursuing right now?

I mean particularly on the debt side, you are burdening the balance sheet quite a bit here drawing down this revolver.

So I'm wondering if there might be an opportunity to do it a more equity for debt swaps or debt for debt swaps.

And on the UAW, would you be able to get a similar maybe downsized contract that GM or Chrysler might be able to achieve?

Are those negotiations ongoing?

You bet, I understand completely, John.

The way I would characterize it is that, you know, this clearly is a restructuring of the automobile industry, and even though we are in a different place and as you pointed out much further along, we thought it was so important that we support the industry for the good of the industry and the US economy and our suppliers and our dealers, which is why we went with our colleagues to Washington, D.C.

to help.

Now having said that, clearly the response we got was that this is an industry restructuring.

The government wants to see a very viable automobile industry in the United States and so as we go forward, our plan is to continue to work all elements of competitiveness including the ones that you delineated.

And I really believe from the ongoing conversations that we are having with all the stakeholders and the US government that as we go through this and we continue to take the actions that we need to take that we will not be disadvantaged.

Okay, so is there an intention or something -- or negotiations that are going or talks going on right now with creditors specifically?

Or is it more on the operating side right now?

I think I'd like to pass on that and just leave it at.

We're talking to all the stakeholders clearly just like we have been over the years.

And clearly the elements of competitiveness, we all know very well but I'm very pleased with the response of all the stakeholders to this bigger restructuring.

Okay and if I could sneak one other one in, Chrysler is cutting labor costs at dealerships or labor reimbursement for warranty work.

And doing some other things that are pretty onerous for their dealers.

Do you look at the dealership network as an opportunity to cut costs or do you look at them as they are an opportunity as other dealerships are coming under pressure as a real strategic advantage here?

I'm just wondering how you were dealing with the dealership base right now.

You bet, John.

I absolutely think of it in the latter.

The Ford distribution network is a tremendous asset, as you know.

The clarity of focus on the Ford Lincoln Mercury brand is phenomenal.

The fact that we have been consolidating those over the last few years to improve the dealers throughput and their profitability, we are tremendously strong in every small and medium-sized community across the United States.

And the only issue that we have been working with the dealers on has been the overcapacity in the large metro areas.

And clearly the dealers want to work that and this is the time to do it, because they are business people, they are entrepreneurs and they absolutely know that we need to straighten this out in the big metropolitan areas and that's where we've been focusing.

I know you know the numbers of the consolidations that we have accomplished and so we are going to continue to work with them.

This is clearly led by them.

There's lots of working together we can do to help make it go easily.

But I am very pleased with the progress we are making on our distribution channel.

One reason I think it makes it much easier so to speak is the fact that we have such a laser focus on the Ford brand.

Great, thank you very much.

Rob Lache, Deutsche Bank.

Good morning, everyone.

Can you talk a bit about working capital going forward?

I think, Lewis, you mentioned the cadence of production could help you Q1 versus Q4, but there's also a lot of talk about supplier distress and the potential for fast pay programs to help suppliers.

So just elaborate a little bit on what your expectations are and how would you be able to increase payables from here just given the state of the union amongst suppliers?

Sure.

In the fourth quarter, all our production cuts were basically towards the end of the quarter and that meant our payables ran off significantly.

As we look at the first quarter, our production cuts are basically as we came out of Christmas, so at the beginning of the quarter we will expect our payables to come back up to a more normal level in the first quarter.

Then as we go through the year, if the recovery happens that we are projecting in the second half we will have a higher level of production and therefore a higher level of payables.

Our suppliers are under some distress.

It varies by individual suppliers.

It's not a Ford problem; it's an industry problem.

We will continue to work with them to solve individual problems, but we believe the payables will come back.

Is it your view that this still represents a systemic risk, just given the magnitude of the cuts and the distress?

There has been a lot of talk especially in the past week or two that suppliers may need some federal assistance here.

Yes, I think the whole industry is concerned about the low level of production which affects all the suppliers and with our interdependence -- and it's not just the domestic brands, it's the transplant brands as well, are all dependent upon a very similar supply base and we are all very, very carefully watching the situation.

Okay, can you also elaborate on the $4 billion cost reduction objective?

How does that break down North America, Europe, Volvo?

Just also clarify is that still a net cost reduction objective?

We won't give you the detail by business unit, Rod, but it is a net cost reduction on structural cost.

It does not include material cost changes.

Okay, what is your preliminary view on material costs?

Is it a plus or minus looking into '09?

Probably both.

We expect to see our material costs related to commodity cost increases we saw last year continue through the first half as we see some of our contracts rolling through.

And in the second half to come back down a little bit as the prevailing commodity cost levels start feeding through into our supply contracts.

Okay, just lastly, when do you expect to hear back on this ILC application?

Is there any guidance that you've been given on what the status of that application would be?

No, we are in active negotiations.

Rod, I might also add on your supplier comments because I think it's really important we are continuing to see -- I think we will continue to see more consolidations as they take out the overcapacity and they focus on the three big companies.

Okay, great.

Thank you.

Chris Ceraso, Credit Suisse.

Thanks, good morning.

One thing maybe you can help to clarify.

When you talk about these structural cost savings for example the $5 billion over the past few years, you say it's on a constant volume basis.

Does that mean that it was actually greater than that but because volume was lower you've adjusted it?

Or I'm wondering if you shouldn't have saved a lot more considering the big drop in volume and the costs that would go away naturally because of the drop in volume?

Yes, the volume adjustments only work on variable and when we do the analysis, we take out the volume adjustment first and then we do the cost reductions at constant volume.

Otherwise it changes whether the volumes are going up or going down, so that's why we do it.

We think that it's a much more representative way of explaining material cost changes.

But a large part of the cost savings were not variable.

They were true fixed costs, so the only area that may get into that is a bit of exchange rate movement.

Okay, you outlined the change in pension-funded status year-end '08 versus '07, but you didn't give us your expectation for pension expense in '09.

Can you share that?

For the US, we don't expect any expense this year.

We are still -- sorry I am using the wrong terms, I'm having my friends point it out -- contributions.

For the non-US affiliates, we are still updating that.

We will have that in the 10-K.

But on a P&L basis, not a cash basis?

We will tell you in the 10-K.

Okay, the Volvo, what's -- do you think you are going to have to fix this?

How do you expect to sell it when you are generating these kinds of losses?

Do you think maybe you have to pull back and fix it before you can get interested buyers?

All we have said is we are exploring our strategic alternatives.

The management team at Volvo is completely consumed with fixing the business and continue to get large amounts of support from the rest of the Ford team.

So whatever the results of our deliberations, the local team and the encouragement they get from Dearborn is to fix the business.

That needs to be done whatever happens.

Okay, thanks for your help.

Patrick Archambault, Goldman Sachs.

You know, just on the supplier issue, obviously there's been a lot written in the press about Visteon and I just was wondering if you could comment, a, have there been any discussions between you and them in terms of trying to get ahead of what some people have speculated to be a filing within the coming weeks?

And how do you react to people who sort of look at the parallel between Delphi and how involved GM had to get in that in sort of the attempted turn around?

Are those parallels accurate or is the situation very different, having gone through several restructurings with Visteon already?

No, I understand, Patrick.

I think that's Visteon and Ford are clearly in a different place.

They -- since we completed those transactions and we took care of parts of the plants and they started Visteon, they have really diversified their portfolio.

And so they are in a much different place.

Now with respect to your first question, we along with Visteon, with all of our suppliers we are talking to all of them weekly because the most important thing we do is continue to make progress and deal with this overcapacity and keep the supply chain going.

But they are I think clearly in a different place, Patrick.

And any chance you could give us a sense of kind of the dollar amount of --?

I mean things have changed so much.

The dollar amount of parts that you guys do count on them for on an annual basis?

No, but I just would emphasize that you can probably get that maybe more insight from Visteon, but they have clearly moved to dramatically diversify.

Okay, thanks.

And I had one on the UAW VEBA.

I guess you replaced cash with notes it sounds like if I'm interpreting it correctly giving you access to that liquidity for the year.

Is that something that you negotiated with the UAW in recent weeks or was that just part of the original contract that you just decided to exercise?

It was in the terms of the agreements and we obviously in consultation with the UAW agreed to access it.

Really to help us through the first quarter with the January slow startups (multiple speakers) We are in very cooperative discussions with the UAW there.

Okay, so it was done in consultation with them?

Oh, yes, absolutely.

This is a big deal for them, yes.

I guess one last one, just housekeeping.

How come you didn't draw down the entire $10.6 billion credit facility because I believe the number you mentioned in the press release was $10.1 billion.

Yes, Neil will give you a perspective on that.

Yes, the $10.6 billion includes letter of credit facilities that we've used so that available -- net available for us on the facility is $10.1 billion.

So we did draw the full amount available.

Got it, okay, thanks a lot, guys.

I'd just like to clarify my comments to Chris at Credit Suisse.

In terms of what we will give you in the 10-K, we will give you our total pension contribution, not expense.

Sorry for the confusion.

I might add on the drawing down our credit facility that our plan is to not use that money to fund the ongoing operations.

And we think we also have sufficient liquidity to maintain our minimum cash balance without using that facility.

What we tried to say really clearly is that we thought it was just at this time very prudent with the volatility in the credit markets due to the uncertainty in the global economy that it was just a prudent time to move that asset over to us.

Himanshu Patel, JPMorgan.

Good morning, guys.

There's been some I think actions taken outside of the US by various governments to stimulate sales.

I think there's been some scrappage incentives in Germany and a tax holiday in Brazil.

Can you give us an update on whether any of these have had any sort of immediate impact?

We had some impact in Brazil at the very end of the fourth quarter and we are seeing significantly increased share in traffic in Germany as a result of their (inaudible).

I must admit I am not sure -- I haven't spoken directly to all the Germans to find out how much of that has been translated into sales although it looked like they are having a good month.

So I think we are modestly encouraged by the German action.

Okay, then I don't know if Neil is there but on the ILC, have you -- can you give us an update on just trying to quantify how much that could help you by in terms of providing low-cost funding?

Should we still think about maybe $12 billion to $18 billion worth or so per year?

This is K.R.

To be clear on the ILC, the ILC was never expected to be a big portion of our overall funding plan.

We've talked in the past that looking at a bank that would grow over time to somewhere $10 billion, $12 billion or so, so it has to grow up over time.

It's not one time.

And I think initially the plan was to use retail assets, and so I think we still have numerous options from a standpoint of those assets and how they get funded.

And then can you talk a little bit about the TALF, how meaningful do you think that would be?

I mean there's obviously a lot of excitement in the marketplace about that being something that could be effective on the ABS market.

But I guess in the case of Ford, you've got some conduit lines at Ford Credit that are running off.

Do you view some sort of improved access to ABS as essentially sort of offsetting that?

I think from our perspective we're pretty excited about the TALF program in general because it clearly is a broad asset program.

It is term and we have gotten a lot of interest already from investors for TALF-eligible securitization.

So we are working with the New York Fed and we expect to have something up and running sort of mid-February.

Okay, great.

Thank you.

Itay Michaeli, Citi.

Thank you, good morning.

Just a couple questions on cash flow and liquidity.

Just for clarification, on the $14 billion to $17 billion of cash improvement, how much might you expect it to generate in '09?

And is the $4 billion of structural cost savings that you are guiding embedded in the $14 billion and $17 billion as well, or is that incremental?

It's roughly half and half 2009 and 2010, of the $14 billion to $17 billion and the $4 billion is embedded in our 2009, that part of the 2009.

But as Alan said, we are continuing to look at restructuring, we are just not ready to talk about the details.

Okay, and then on liquidity, if I kind of take the comments on the revolver drawdown as merely a backup for the operations as opposed to actually being used in the operations.

If I just run very simple math, you (inaudible) $15 billion of cash, let's say you need $7 billion to $8 billion of minimum cash, so should we roughly assume $7 billion to $8 billion is kind of what you are thinking for an '09 cash burn or am I missing something there?

We wouldn't go into the math because we are not about to declare the minimum cash levels, but we expect 2009 cash burn to be much, much lower than 2008.

There were some significant one-offs like the VEBA payment in 2008.

There is the payables impact as we go through the year with a gradually increasing volume rather than declining volume.

CapEx is down $1 billion to $1.5 billion and we are as you heard us say applying for both Section 136 loans from the Energy Independence and Security Act and also applying to the European Investment Bank for CO2-related loans.

Okay, I see.

That's helpful.

Just finally, just a point of clarification on the stakeholders negotiations.

I know you can't really get into any detail, but should we assume these are just simply Ford Motor Company stakeholders or are you also speaking with stakeholders specific to Ford Motor Credit?

Like specifically creditors there?

No, our actions are around being competitive in the auto industry, so the discussions that Alan was talking about specifically were Ford Motor Company stakeholders.

We are doing a number of things about Ford Credit, not just financing actions but also we are having discussions on different business arrangements in various countries where funding is difficult to achieve.

For example, we just announced that we've withdrawn from retail financing in Australia along -- and we are about the last person to withdraw and we've made different arrangements in some parts of northern Europe.

Obviously as the Jaguar Land Rover divestiture occurred, we are making different arrangements for Jaguar Land Rover financing.

So there are different actions happening with Ford Credit and as you know today, that the US part of Ford Credit announced a 20% personnel reduction during this first half of the year.

Great.

Thank you.

Ladies and gentlemen, at this time we would like to welcome questions from the media community.

(Operator Instructions) Bryce Hoffman, The Detroit News.

Good morning, gentlemen.

Am I understanding correctly that you have just lowered your SAAR estimate by about 1 million units for the year, correct?

We provided a range when we were in Washington on December 2, we provided a point, 12.5.

We are now providing a range of 11.5 to 12.5.

You know, it's very volatile.

We don't just know whereabouts in that range it will be, but the fact that we've identified a range suggests that we think 12.5 is towards the top end of probability.

Lewis, just following up on that, you guys have said that you wouldn't need to go to seek federal assistance if the domestic market didn't significantly deteriorate from your planning assumptions.

Isn't this a significant deterioration potentially from those assumptions?

Can you explain a little bit more how you remain confident in your ability to proceed without aid from Washington given that?

Well, it's specifically -- it's not what we would regard as significant deterioration.

Obviously as volumes come down a little bit, we have to work harder on other aspects of the business and I think you have seen in the past that we are relentless at reacting to the prevailing demand, and that's what we are doing.

And that is not just around the US.

It's around Europe and South America and Asia Pacific.

Got you, one just clarification, too.

Following up on the analyst question about Visteon, I just wanted to be clear you guys are not anticipating any sort of kind of dramatic rescue action with regards to Visteon, correct?

No and we have read -- all we have seen is the press reports.

We are not contemplating dramatic action.

Great.

Just to extend my response to Bryce on industry volumes, as we said in Washington, it's not just around the absolute volumes.

It's also around the length of the downturn and when the recovery starts.

We still feel that with the amount of stimulus that is going on in the US market, that we will see some improvement in the second half of this year.

You bet.

Jeff Bennett, Dow Jones.

Lewis, just a quick question.

My line cut out.

So you are not anticipating making any kind of cash contributions into Visteon to keep it running?

It's basically on its own from your standpoint?

Visteon is a stand-alone company and like all our suppliers, we talk to our suppliers when they have problems and try and work with them.

But they are a stand-alone company.

Okay and do you anticipate in the structural cost that that would include more involuntary layoffs and plant idling or where would that kind of focus in on?

I think it really, Jeff, is going to be determined by the market and the industry and the volumes going forward.

We are about where we need to be right now.

But were going to -- like we have, we're going to monitor it very closely and take decisive actions.

Because the most important thing we do is match our production and real demand.

Okay, thank you.

Tom Krisher, Associated Press.

Hello, gentlemen.

I was wondering if -- does the restructuring -- your $4 billion structural cost reductions for '09, does that include anything you might net out of the Treasury Department's demands that you are trying to seek parity with Chrysler and GM?

Well, first of all, there are no demands on Ford while we don't request government assistance.

The demands on Ford are self-induced to remain competitive.

And anything we do to improve our competitiveness will go towards achieving or overachieving on the $4 billion cost reduction.

Okay, and the 30,000 units of production that you plan to take out beyond your prior estimates, how would you achieve that?

Would that be any plant closures or is that line rate reductions and more gradual things since it is a relatively smaller number?

This is a relatively small day-to-day production adjustment.

It will be a bit of downtime I think.

Very good, thank you.

Any Wilson, Automotive News.

Good morning.

I wanted to ask what is the soonest that you think you can get the DOE funds and how much would you expect to get in an initial disbursement there?

We don't know the exact timing of that, Amy, but I think it's going to be relatively soon.

We -- the feedback we've gotten is that we are in very good shape with our submittal.

Our enabling technology and is very much lined up with the intent of the 2007 Energy Independence and Security Act.

So we are in continuing -- answering questions for clarification but I think that it will be relatively soon.

I can't give you an estimate on the amount yet.

But I just might say that I think it's really meeting the intent of the bill that was passed in 2007 because it really is going to help develop the enabling technology that the Congress really wanted to support.

So it will be substantial.

Okay, but so we understand correctly it is something that could help bolster your liquidity position during this calendar year as well?

Yes, absolutely.

Okay.

And I just wanted to ask why was the CapEx higher than $0.5 billion higher than the planned?

Mainly completing the launch of the F-150.

And that was more than you had budgeted for?

No, not so much that it was more expensive, but as we continue to develop our whole product cycle plan, we just ended up where it was about -- we wanted to spend that much to further solidify the product strategy going forward.

CapEx spending forecasting towards year-end is really hard.

Sometimes the bills pop up over to the next year.

When we set the objective, I think it was actually a rounded $6 billion and we were pretty close.

Okay, thanks.

Robert Schoenberger, The Plain Dealer.

Good morning.

I have a technical question and a more serious one.

On the technical side, Jobs Bank, how many people are in that right now?

About 1500 right now.

We expect that to reduce significantly in the first quarter as some of those -- some people move to different plants where we have opportunities.

And at that the Detroit show, Jim Farley had mentioned that January sales were looking a bit healthier than December.

Has that trend continued or is there any hope for any kind of even modest recovery in the first few months of this year?

It is about the same.

About the same as December or --?

As December, sorry.

Okay, great.

Thank you very much.

David Bailey, Reuters.

The question was do you expect the Volvo books to go out in the next few weeks in terms of the potential sale of the brand?

We are not giving any detail of the timetable of our exploring strategic options.

Now as a further question about the supply base, certainly we've talked a little bit about Visteon, but how much do you have -- have you broken out how much money you expect to need to put into the supply base this year to keep it running given the stresses you've discussed?

No.

No.

Think he very much.

David Kiley, BusinessWeek Magazine.

Good morning, gentlemen.

Hi, David.

Have you driven a Ford lately?

Yes I have, as a matter of fact.

Two questions today.

One on cash burn for the year, could you -- the first question is if you could give me a little color on that, the $9.4 billion line item and exactly what goes into that?

Then secondly, if you could -- if you could do a little color on how the production mix in the first quarter is going to impact cash burn, because I believe that you are doing a lot more truck.

And I wondered how that is going to impact your cash burn for the first quarter?

Sure.

The $9.4 billion more than $5 billion or about $5 billion was accounted for by payable declines.

I'm sorry, what declines?

Trade payables.

So that's the biggest element of it.

Really (multiple speakers)

Associated with reducing the production.

It really reflects the reduced production and the fact that at the last few weeks of December we had very little production.

I'm sorry, I didn't hear your question on mix in the first quarter.

Right, I wondered if you could -- because you've said that your cash burn will be much improved and I wondered in the first quarter, I believe that production of the F-Series is going to be a much more pronounced part of production in the first quarter.

And I wondered, a, if you can give some color on how that's going to impact cash burn?

And also what are your dealers telling you about demand for the new F-Series?

I think the bigger impact on cash burn in the first quarter will be around total production.

Mix will be a secondary impact.

And in terms of response from the dealers, we are hearing very encouraging things about the acceptance of the F-150, very, very strong high series mix, which is encouraging.

So we've had an encouraging start.

David, I might add just a little bit more color.

One of the positive things about taking decisive and aggressive action in the fourth quarter on production to match the production to the real demand is that we kind of got that behind us now and as we go along here at these -- stabilize at these lower rates for the first two quarters and start to come back in the second half of the year, that really, really helps us significantly reduce the cash burn.

I am going to just sneak a quick one in here.

As far as dealing with the government right now, since you are not accessing loans per se but have this application outstanding for a line of credit, are you having to meet basically all the same parameters of financial viability as GM and Chrysler are for the actual loans by February 17 and by March 31?

No, not at all.

We are not in that process.

We stay involved.

We will continue to update them on our continuing restructuring of Ford.

Also I might just point out at the end of the year last year, the Treasury put in place an Automotive Financing Act or vehicle that their intent was that anybody that needed to see them to keep -- without hurting the automotive recovery, there was a vehicle for them to come see them.

So we don't have a standing line of credit, but we have a vehicle that if we ever need to access the money that we could use.

No, we are not in that process because we are not taking any taxpayer money.

Katina, we have time for one more question then, please.

Joann Muller, Forbes Magazine.

Hi there.

You said that you still believe Ford doesn't have to access any government funds unless there is a significant event.

Could you be a little more specific about what you would define as a significant event?

No, because it could be many things.

It could be the economy itself.

It could be the industry.

It could be share.

It could be the credit.

We haven't scoped it out.

The best thing we did during, as you know, during the hearings, is that Congress asked us for a range of outcomes.

So we gave them a range of three different outcomes that kind of bracketed the whole thing.

And we are clearly moving along on the bottom side of that, of those scenarios.

The bottom side of it, you said?

Yes.

For the first half and then coming back in the second half.

Just to be clear, it sounds like the door is still wide open that you might need to go and ask for some assistance with so many things that you just ticked off there that could go the wrong way.

Well, it's a very volatile time for all of us.

But I think that with the actions that we are taking on the fiscal policy and the monetary policy that we think that's going to support the economic turnaround and it's not our plan at all to access the government money.

As we shared today, we put this plan in place two years ago including the line of credit and so we have sufficient cash to continue to finance our product development and our restructuring.

So we have no plans at this time and don't anticipate using the government funds.

One less thing on Ford Credit.

You talked about it as a strategic asset.

General Motors of course as a result of the aid that GMAC got will no longer have a captive finance at all.

I suppose you could argue that they didn't when they sold controlling interest.

But nonetheless, they are going to wind down to almost nothing.

How do you think that would put Ford at an advantage to have its own strategic or captive finance company?

Well, we believe more than ever, Joann, that Ford Motor Credit is a strategic asset of the Ford Motor Company.

The dealers just absolutely love an integrated approach with being able to finance the cars and finance the showroom and have one-stop shopping and a completely integrated when you work with Ford.

So we are more positive than ever that Ford Motor Credit is -- it really is a strategic asset for Ford.

You're write-downs -- any idea what the total write-downs has been for credit losses over the last year?

K.R.

thinks -- they are going to do a credit call pretty soon.

It might be a good time to -- it will be a good place because you will have all of the experts there that cover credit.

All right, thank you.

That concludes today's presentation.

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