福特汽車 (F) 2010 Q2 法說會逐字稿

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

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

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

Later we will conduct a question-and-answer session.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr.

Brian Harris, Director of Investor Relations.

Please proceed, sir.

Thank you, Tawanda; and good morning, ladies and gentlemen.

Welcome to all of you who are joining us today either 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 here today are Alan Mulally, President and CEO of Ford Motor Company, and Lewis Booth, Chief Financial Officer.

Also in attendance are Bob Shanks, Vice President and Controller; Neil Schloss, Vice President and Treasurer; Paul Andonian, Director of Accounting; and K.R.

Kent, Ford Credit's CFO.

Before we begin, I would like to cover a few items.

Copies of this morning's press release and the presentation slides we will be using today have been posted on Ford's investor and media website for your reference.

The financial results discussed herein are presented on a preliminary basis.

Final data will be included in our Form 10-Q.

The 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 the US GAAP equivalent 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 made here.

The most significant factors that could affect future results are summarized at the end of this presentation.

These risk factors and other key information are detailed in our SEC filings including our annual, quarterly, and current reports.

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

Alan Mulally.

Thank you, Brian, and good morning to everyone.

We are pleased today to report very solid financial results for the second quarter, which underscores that our One Ford plan is clearly working.

Ford earned a pretax operating profit of $2.9 billion for the quarter, as each of our major business operations around the world posted improved profits compared to last year and the first quarter of 2010.

We generated positive Automotive operating-related cash flow of $2.6 billion and strengthened our balance sheet, paying down $7 billion of debt and lowering our interest costs.

At the same time, we are increasing our investments to support greater growth in the future.

Overall, we are ahead of where we thought we would be after this excellent first half.

We clearly remain on track to deliver solid profits and positive Automotive operating-related cash flow for 2010.

And we expect even better results in 2011.

The driving forces behind our progress include our new products and our leaner, global structure.

We have developed what we and many others believe is our finest ever product lineup, a full family of vehicles with world-class quality, fuel efficiency, safety, smart design, and the best value.

I will start off with this morning by providing you with an overview of our financial results and business, product, and sales highlights; then Lewis Booth will walk us through the financial results in even greater detail.

Finally, I will summarize our 2010 outlook and our plan going forward.

Turning to slide 3, I'll begin by reviewing the key financial results compared with a year ago.

As we mentioned last quarter, based on our agreement to sell Volvo, all of our Volvo's 2010 results are reported as special items and excluded from our wholesales revenue and operating results.

2009 results include Volvo.

As shown at the top of the slide, second-quarter vehicle wholesales were 1.4 million units, up 224,000 units.

The increase was explained by higher wholesales in all of our Automotive segments, offset partially by the exclusion of Volvo.

Excluding Volvo from 2009, the wholesale increase was 303,000 units or 27%.

Our second-quarter revenue was $31.3 billion, a $4.5 billion increase.

The increase was explained primarily by higher volumes, favorable net pricing, and a favorable exchange translation offset partially by the exclusion of Volvo.

Excluding Volvo from 2009, the revenue increase was $7.4 billion or over 30% increase.

Our second-quarter pretax operating profit, excluding special items, was $2.9 billion, a $3.5 billion improvement.

Automotive results improved by $3.2 billion, and Financial Services improved by $280 million.

Our second-quarter net income attributable to Ford, including unfavorable pretax special items of $95 million, was $2.6 billion, a $338 million improvement.

For the first half, pretax operating profit, excluding special items, was about $5 billion, a $7.5 billion improvement; and net income attributable to Ford was $4.7 billion, about a $3.9 billion improvement.

We ended the quarter with $21.9 billion of Automotive gross cash, up $1.5 billion from a year ago.

Slide 4 details some of our key business highlights since our last earnings release.

During the quarter, we repaid $7 billion in Automotive debt, including about $3.8 billion to the UAW Retiree Medical Benefits Trust, or VEBA.

In addition, we repaid $3 billion of our revolving credit facility earlier in the quarter.

These actions will save Ford more than $470 million in interest costs on an annualized basis.

Ford was recognized as a leader in relationships with its suppliers by key third-party studies, including being awarded No.

1 in a UBS Investment Research quarterly survey of OEM-Supplier relations in the United States for a second consecutive quarter.

We also announced several investments aimed at continuing to strengthen our global business going forward.

In Thailand we announced a $450 million investment in a state-of-the-art flexible passenger vehicle manufacturing plant.

We also announced a $250 million investment in Argentina in order to outfit our Pacheco Plant.

We announced a $135 million investment to design, engineer, and produce key components in Michigan for our next-generation hybrid-electric vehicles that go into production in 2012.

And last month we announced a plan to discontinue production of the Mercury brand in the fourth quarter of this year, allowing us to increase our focus on the Company's core brands in North America.

Turning to slide 5, please, we will look at Ford's product highlights since our last earnings release.

Ford continues to receive affirmation from third parties with regards to quality of our products.

In June, Ford ranked as the top non-luxury brand in J.D.

Power & Associates' closely watched Initial Quality Study for the US market.

We received seven Top Safety Picks in the Insurance Institute for Highway Safety awards for the 2010 model year, tying the highest mark for the industry.

On the brand front, we committed to focus more on the Lincoln brand, including seven all-new or significantly refreshed models in the next four years.

During the quarter we revealed a freshened Mondeo in Europe with a restyled exterior and an upgraded interior.

Mondeo is leading the way in our revolution under the hood in Europe, as it will receive a new high-efficiency EcoBoost gasoline and TDCi diesel powertrains.

We also announced our plan to begin delivering the Transit Connect Electric to European customers in late summer of 2011.

Also in Europe, we launched a limited-edition Focus RS 500 high-performance model, and it quickly sold out.

And in Thailand we began production of the new Fiesta for Southeast Asia markets, representing the latest milestone in the vehicle's successful global launch.

Turning to slide 6, we will look at Ford's sales highlights since our last earnings release.

We are very encouraged by our continuing market share gains in the United States.

During the quarter, we posted a 21% year-over-year sales increase and gained a half point of market share, driven by the strong retail market performance of our products, including the F-Series, the Taurus, and the Transit Connect.

In the Asia Pacific Africa region, we posted a 27% year-over-year sales increase, including a 20% increase in China.

Transit, Mondeo, and our small car lineup remain strong performers in this region.

We reported record quarterly sales in India, more than tripling sales due to strong initial demand for our Ford Figo.

The vehicle, launched earlier this year, received 25,000 orders in its first 100 days on the market.

In Canada, we strengthened our leadership position, expanding market share to 17.5% during the period, up 2.1 percentage points from a year ago.

Now I would like to turn it over to Lewis to provide more detail on our second-quarter financial results.

Thanks, Alan.

Let's move on to slide 8 to summarize our financial results compared with a year ago.

Our second-quarter pretax operating profit, excluding special items, was $2.9 billion, a $3.5 billion improvement.

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

Our pretax operating profit excluded unfavorable special items of $95 million, which we will cover on the next slide.

We recognized $251 million of tax expense, a $266 million increase explained primarily by the nonrecurrence of a prior-year tax settlement.

As a reminder, our continued low effective tax rate is primarily the result of our valuation allowance against deferred tax assets.

As we establish a sustained period of profitability over time, we will need to evaluate elimination of the present valuation allowance against deferred tax assets.

This change will result in the accrual of tax expense at a more normalized rate, and this will impact earnings per share but, importantly, will have no impact on cash flow.

Bottom line, second-quarter net income attributable to Ford was $2.6 billion, a $338 million improvement, which was reduced by the nonrecurrence of a prior-year gain of over $3 billion on debt restructuring actions.

Slide 9 covers special items, which were an unfavorable pretax amount of $95 million in the second quarter.

We recorded $229 million of personnel and dealer related charges, including primarily costs related to the discontinuation of Mercury.

The first-half cost associated with Mercury discontinuation and total US dealer reductions is expected to be somewhat less than half of the total expected special item charges for these actions during the 2010 and 2011 period.

There were also $94 million of favorable held-for-sale adjustments for Volvo, reflecting its operating profit, and other held-for-sale related items including cessation of depreciation.

As shown in the memo, if we had continued to report Volvo in our operating results, we would have reported a second-quarter pretax operating profit of $53 million for Volvo.

This would represent an improvement of $290 million compared with a year ago, more than explained by favorable volume and mix, net pricing, and material costs, offset partially by higher structural costs.

This is continuing evidence that the Volvo team has returned the business to sustainable profitability.

Lastly, we recognized a $40 million gain related to the full prepayment of our VEBA Note A debt obligation at a discount.

This and other debt reduction actions will be discussed in more detail later.

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

Our second-quarter pretax operating profit was $2.9 billion.

This includes a profit of $2.1 billion for the Automotive sector and a profit of $875 million for Financial Services.

As Alan mentioned and as shown in the memo, total Company second-quarter pretax operating results improved by $3.5 billion compared with a year ago.

In addition, this was an improvement of $932 million compared to the first quarter of 2010.

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

In the second quarter, all of our Automotive segments reported a profit and, as shown in the memo, showed significant improvement compared with a year ago and with first-quarter 2010.

We will cover these Automotive segments in more detail on the upcoming slides.

The second-quarter Other Automotive loss was $551 million.

This includes net interest expense of $459 million which was comprised of about $520 million of interest expense offset partially by interest income.

In addition, there was $92 million of unfavorable fair market value adjustments, associated primarily with our investments in Mazda.

As shown in the memo the nonrecurrence of Volvo's prior-year losses improved our pretax operating results by $237 million compared with a year ago.

Slide 12 shows the change in second-quarter pretax operating results compared with 2009 by causal factor.

Overall, second-quarter results improved by $3.2 billion compared with a year ago.

Volume and mix was $1.5 billion favorable, explained primarily by the nonrecurrence of the prior-year stock reductions to align with demand, as well as higher global industry volumes.

Net pricing was $1.1 billion favorable, explained primarily by improvements in North America, including continued reductions in incentive spending and selected top-line pricing.

Costs decreased by $200 million, reflecting primarily material cost reductions and lower warranty costs, offset partially by higher structural cost to support volume and growth of our product plans, as well as higher commodity costs.

Exchange was $500 million favorable, reflecting primarily the nonrecurrence of unfavorable prior-year balance sheet revaluation in North America.

Net interest and fair market value adjustments were $400 million unfavorable, explained by the nonrecurrence of prior-year favorable fair market value gains largely attributable to our investment in Mazda, and higher interest expense associated with the VEBA debt added as of the end of 2009.

Volvo's impact represents a change in reporting as we have previously mentioned.

As shown in the memo, the $900 million improvement compared to the first-quarter 2010 reflects primarily higher volume, offset partially by higher cost to support the volume increases and our product plans.

For the next section of slides we will cover each of the Automotive segments, starting with North America on slide 13.

In the second quarter, wholesales were 659,000 units, up 201,000 units from a year ago, including primarily US industry growth and the nonrecurrence of a prior-year reduction in dealer inventories.

Dealer inventories during the second-quarter 2010 were unchanged compared to the first quarter.

Second-quarter US total market share for Ford, Lincoln, and Mercury was 16.9%, up one-half of a percentage point from a year ago, which will be discussed in more detail later.

Second-quarter revenue was $16.9 billion, a $6.2 billion increase from a year ago, explained primarily by higher volumes and favorable net pricing.

For the second quarter, North America reported a pretax operating profit of $1.9 billion, a $2.8 billion improvement from a year ago.

And we will cover this in more detail on the next slide.

Slide 14 provides an explanation of the change in North American results compared with 2009 by causal factor.

Volume and mix was $1.4 billion favorable, reflecting primarily higher industry volumes, favorable changes in dealer stocks, and market share improvements.

Net pricing was $1 billion favorable, reflecting primarily continued reductions in incentive spending and selected top-line pricing, consistent with the success of our full range of products in the marketplace.

Costs increased by $100 million, reflecting primarily higher structural and commodity costs, offset partially by material cost reductions.

Exchange was $400 million favorable, reflecting primarily the nonrecurrence of an unfavorable prior-year balance sheet revaluation.

Slide 15 shows US market share for Ford, Lincoln, and Mercury.

In the second quarter US total market share was 16.9%, up one-half of a percentage point from a year ago, more than explained by higher market shares for F-Series, both the F-150 and the new Super Duty, the new Taurus, and the Transit Connect.

Additionally, US retail share of the retail industry was an estimated 14.1% in the second quarter, up 1 percentage point from a year ago.

Although not shown, Canada total market share in the second-quarter was 17.5%, up 2.1 percentage points from a year ago.

Improvements in quality, fuel efficiency, and residual values are driving stronger considerations and demand for Ford products, enabling the Company to achieve market share gains and improved revenue.

In addition, customers continue to equip their vehicles with high levels of content and technology, which also contributes to higher transaction prices on most Ford vehicles.

Now on to South America on slide 16.

In the second quarter, wholesales were 130,000 units, up 19,000 units from a year ago, reflecting primarily higher dealer stocks and industry volumes, offset partially by lower market share.

The stock increase reflects, in part, achieving more normal levels in anticipation of plant shutdowns.

Second-quarter market share was 9.5%, down 9/10 of a percentage point from a year ago.

The decrease includes adverse segmentation on our decision to not match escalation of competitive discounts.

Second-quarter revenue was $2.6 billion, an $800 million increase from a year ago, reflecting primarily higher volumes, favorable exchange translation, and favorable net pricing.

For the second quarter, South America reported a pretax operating profit of $285 million, a $199 million increase from a year ago.

The increase reflects primarily favorable net pricing, favorable exchange, and higher volumes, offset partially by higher commodity and structural costs.

Slide 17 covers Europe.

In the second quarter, wholesales were 420,000 units, up 20,000 units from a year ago.

Higher volume in Eastern European markets, Russia, and Turkey was offset partially by lower volume in our 19 major markets.

The decrease in our 19 major markets reflect primarily lower market share and industry volume, offset partially by an increase in dealer stocks to return to normal planning levels.

Second-quarter industry SAAR for the 19 markets that we track was 14.9 million units, down 1.2 million units from a year ago as scrappage programs were reduced or concluded throughout the region.

Second-quarter market share was 7.9%, down 1.1 percentage points from a year ago.

This reflects the escalation of competitive discounts and our decision to reduce participation selectively in low-margin business, as well as the end of favorable effects of scrappage programs on our small-car sales.

Second-quarter revenue was $7.5 billion, a $500 million increase from a year ago, reflecting primarily higher volumes and favorable mix, offset partially by unfavorable net pricing and exchange translation.

For the second quarter, Europe reported a pretax operating profit of $322 million, a $265 million increase from a year ago.

We will cover this in more detail on the next slide.

Slide 18 provides an explanation of the change in Europe results compared with 2009 by causal factor.

Volume and mix was unchanged compared with a year ago.

Lower market share and industry volume in the 19 markets we track was offset by a stock increase to return to normal planning levels and higher volumes in Eastern European markets, Russia, and Turkey.

Net pricing was $100 million unfavorable.

Higher vehicle pricing was more than offset by higher incentives as we selectively responded to competitive spending increases following the end of the scrappage programs.

Costs decreased by $300 million, reflecting primarily lower material costs, driven in part by a decrease in distressed supplier spending and lower warranty costs, explained primarily by a favorable warranty reserve adjustment that is not expected to reoccur.

Slide 19 covers Asia Pacific Africa.

In the second quarter, wholesales were 209,000 units, up 63,000 units from a year ago, reflecting strong industry growth in China and India and the introduction of the new Figo in the Indian market, as well as an increase in dealer stocks to match market demand as we recover from strong industry growth in first-quarter 2010.

The second-quarter industry SAAR was 28.1 million units, up 5.2 million units from a year, explained primarily by increases in China, India, Indonesia, and Thailand.

Second-quarter market share was maintained at 2.4% despite strong growth in segments in which we do not fully participate.

Second-quarter revenue, which excludes sales at our unconsolidated China joint ventures, was $1.8 billion, a $600 million increase from a year ago.

This reflects primarily higher volumes outside of China and favorable exchange translation, offset partially by unfavorable mix.

For the second quarter, Asia Pacific and Africa reported a pretax operating profit of $113 million, a $140 million improvement from a year ago, more than explained by higher volumes reflecting primarily higher industry, lower costs, and favorable exchange.

This strong quarterly profit provides a solid foundation for future growth.

Slide 20 shows Automotive gross cash and operating-related cash flow.

We ended the second quarter with $21.9 billion in Automotive gross cash, down $3.4 billion from the first quarter of 2010, as a result of substantial debt reduction actions.

Our Automotive operating-related cash flow was $2.6 billion positive in the second quarter, reflecting the Automotive pretax operating profit of $2.1 billion.

Capital spending during the quarter of about $1 billion equaled to depreciation and amortization.

We continue to realize efficiencies in our capital spending from our global product strategy, and we still expect spending to increase in the second half to support future growth.

Changes in working capital of $500 million reflecting primarily higher payables associated with higher production.

Other timing differences were $300 million favorable.

For the first half, working capital and other timing differences were largely unchanged.

And payment of $300 million to Ford Credit reflecting upfront payments of subvention.

Other major changes in second quarter Automotive gross cash included separation payments of $100 million and pension contributions of $400 million.

Debt reduction actions including paying down our revolving credit line and making scheduled payments on our VEBA debt, and fully prepaying our VEBA Note A debt obligation.

These actions will be discussed further on the following slides.

Equity issuance of about $300 million, and other cash changes of $200 million, more than explained by the impact of exchange on non-US cash balances.

Slide 21 summarizes recent Automotive sector debt reduction actions.

As previously announced, we completed debt reduction initiatives during the second quarter that reduced Automotive debt by $7 billion and will lower interest expense by more than $470 million on an annualized basis.

These actions include $3 billion repayment in early April of our revolving line of credit; a $3.8 billion payment to the VEBA Trust.

In addition to our scheduled payments, this fully retired our VEBA Note A obligation.

Ford Credit's $1.3 billion purchase of VEBA Note A is a settlement of the existing intercompany tax liabilities.

Further, we made a $255 million cash payment to bring current previously deferred quarterly distributions on our trust-preferred securities.

As part of the VEBA actions, subject to regulatory approval, we obtain greater flexibility until mid-2013 to prepay all or a portion of the remaining Note B obligations in cash at a discount.

These prepayments can be made periodically during the year.

The discount is 5% for prepayments made prior to 2012 and a 4% discount for prepayments made during 2012 and 2013.

Previously, we could prepay Note B once a year at par.

Slide 22 summarizes our Automotive sector's cash and debt position.

At the end of the second quarter, Automotive debt was $27.3 billion of which $1.1 billion matures within one year.

Our gross cash net of debt as of June 30 was $5.4 billion negative, an improvement from the $9 billion negative as of the end of March.

Total liquidity including available credit lines was $25.4 billion.

This liquidity includes $3.1 billion under our secured revolving credit lines and $450 million of Other Affiliate Automotive credit lines.

Now let's turn to slide 23 and Financial Services.

For the second quarter, the Financial Services sector reported a pretax operating profit of $875 million, a $280 million increase from a year ago and a $60 million increase compared with the first-quarter 2010, as shown on the memo.

Other Financial Services reported pretax operating loss of $13 million in the second quarter, a $38 million improvement from a year ago, including the nonrecurrence of a loss related to a real estate transaction.

For the second quarter, Ford Credit reported a pretax operating profit of $888 million, a $242 million increase from a year ago, which we will cover in more detail on the next slide.

Slide 24 provides an explanation of the change in Ford Credit results compared with 2009 by causal factor.

Volume was $100 million unfavorable, reflecting declining receivables.

As shown in the memo on the lower left of the slide, Ford Credit's managed receivables at June 30, 2010, were $87 billion, $13 billion lower than a year ago.

This decline reflects primarily the transition of Jaguar, Land Rover, Mazda, and Volvo financing to other finance providers; the decline in industry volumes over the past few years; and changes in currency exchange rates.

The decline in the provision for credit losses of $600 million reflects primarily lower credit loss reserves and improved chargeoff performance.

Residual losses declined by $100 million, reflecting primarily the impact of higher auction values on vehicles returning during the quarter.

Other decreased by about $300 million, reflecting primarily the nonrecurrence of prior year net gains related to unhedged currency exposures.

We now expect Ford Credit's full-year 2010 profits to be higher than its 2009 profits.

The second half of 2010 will be lower than the first half because Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half.

For the full-year 2011, we expect Ford Credit to continue to be solidly profitable, but at a lower level than 2010, reflecting primarily the nonrecurrence of lower lease depreciation expense and nonrecurrence of credit loss reserve reductions of the same magnitudes as 2010.

Slide 25 shows the -- covers the liquidity and funding outlook for Ford Credit.

The left box shows committed liquid programs and cash and the utilization of liquidity sources at the end of the second quarter.

Ford Credit's liquidity exceeded utilization by about $21 billion, about the same as first-quarter 2010.

We remain on track to achieve our full-year funding plan, completing about $6 billion of funding in the second quarter and about another $1 billion in July.

Additional highlights include a US public retail transaction at pre-crisis credit spreads; $12 billion of committed capacity renewals; and $2 billion of net incremental capacity.

Ford Credit's funding structure remains focused on access to public and private securitizations, asset-backed commercial paper, and unsecured debt.

Our liquidity remains strong, and we will continue to maintain cash balances, funding programs, and committed capacity to ensure liquidity adequately meets our funding requirements.

At the end of the second quarter, Ford Credit's managed leverage was 6.6 to 1, and equity was $10.9 billion.

Slide 26 covers our third-quarter 2010 production plans.

In North America, the third-quarter production schedule is 570,000 units, up 80,000 units from a year ago and unchanged from our prior guidance.

In South America, the third-quarter production schedule is 130,000 units, up 15,000 units from a year ago.

For Europe, we expect third-quarter production of 356,000 units, down 29,000 units from a year ago.

This decline reflects primarily the nonrecurrence of prior-year production increases to support European scrappage programs.

For Asia Pacific and Africa, we expect third-quarter production of 213,000 units, up 60,000 units from a year ago.

Overall, we expect total Company third-quarter production to increase by 126,000 units from a year ago, reflecting continued strong customer demand for our products, maintenance of competitive stock levels, and the nonrecurrence of prior-year stock reductions.

Compared with the second quarter, our third-quarter production is down 174,000 units.

The decrease reflects planned vacation shutdowns during the third quarter that are generally used to prepare for new models.

Fourth-quarter production also will be affected by planned holiday shutdowns, and new product changeovers for vehicles such as Focus and Explorer.

Overall, our third- and fourth-quarter production schedule is lower than the first half, but is consistent with our strategy to match supply with demand.

And now I would like to turn it back to Alan to summarize or 2010 outlook and our plan going forward.

Thank you very much, Lewis.

On slide 28, we provide an overview of the business environment going forward.

The global economic recovery continued in the second quarter, and we expect a modest pace of growth to be sustained.

This year's global industry volume is projected to be up by 5% to 10% compared with last year's level of 65 million units.

Many scrappage and other government incentive programs are ending, primarily in the European markets.

This impact on global volume, however, is offset by year-over-year gains in China, India, the US, and Brazil, as well as other emerging markets.

Market recoveries in Asia are moderating, but the markets remain very strong.

We also continue to see relatively weak growth in consumer spending in the United States and Europe, reflecting weak labor markets and tight credit conditions.

These conditions are improving slowly.

The debt crisis in Europe will generate significant fiscal tightening, which is likely to act as a near-term drag on growth.

Central banks around the world are beginning to wind down many of the special lending programs that were implemented at the height of the financial crisis.

However, low levels of interest rates in the United States and Europe will continue to support economic growth.

In China, India, and Brazil, the strong rates of growth earlier this year have already generated some tightening of the monetary policy to contain inflation pressures.

Commodity prices remain significantly higher than last year's lows, although the strength has moderated in recent weeks.

Crude oil prices in the $70 to $80 per barrel range are up about 50% from last year's lows.

Overall, the global business environment remains challenging, but we expect global growth to continue.

Slide 29 summarizes the status of our key planning assumptions and operational metrics for the first half and our 2010 full-year outlook.

First-half industry volume SAAR was 11.4 million units in the United States and 15.4 million units in the 19 markets we track in Europe.

We have tightened the range of our industry outlooks based on an assessment of the first-half performance.

We expect full-year US industry volume to be in the range of 11.5 million to 12 million units.

Full-year European industry volume is expected to be in the range of 14.5 million to 15 million units, reflecting a stronger than expected first half, offset by a weaker second half.

On the Automotive operational metrics, all of our regions are on track to improve quality compared with year-ago.

Automotive structural costs were $350 million higher in the first half.

We expect full-year Automotive structural cost to be about $1 billion higher to support growth and key product introductions.

Our cost structure, however, continues to improve as a percentage of revenue.

Although not shown, commodity costs were $400 million higher in the first half.

And for the full year we expect commodity costs to increase by about $1 billion.

US total market share was 16.7%, and the US share of the retail market was 14.1% in the first half.

Both improved compared with 2009, and we now expect full-year US market share to improve.

Europe market share for the first half was 8.7%, and we now expect full-year European market share to be about equal to the first half of 2010 but lower than 2009, reflecting our decision to limit increases in incentives in the region.

Automotive operating-related cash flow was $2.5 billion positive in the first half, reflecting our improved profitability.

For the full year, we remain confident of our plan to generate positive operating- related cash flow.

Capital expenditures were $1.9 billion in the first half.

We expect full-year spending to be about $4.5 billion to support our product plan as we continue to realize efficiencies from our global product development processes.

We expect to have solid financial results in the second half, continuing to exceed the expectations we had earlier this year.

As in most years, our first-half results will be stronger than the second half reflecting normal seasonality, including lower second-half volumes related to planned shutdowns and product launches.

This year, we also expect higher investment and costs in the second half to support growth and key product introductions, as well as higher commodity costs and smaller reductions in reserves at Ford Credit.

Overall, we expect to achieve great results for the full-year, providing a solid foundation for continuing growth.

For 2011, based on our present planning assumptions, we expect continuing improvement in total Company profitability and Automotive operating-related cash flow, including improvement in our Automotive operations.

These improvements are driven primarily by the growing strength of our global products, continuing cost structure improvements, and the gradual strengthening of the global economy.

Ford Credit will continue to be solidly profitable, but at a lower level, reflecting primarily a lower occurrence of this year's favorable factors.

In addition, by the end of 2011, we expect to move from an Automotive net debt position to a net cash position.

Slide 30 summarizes our plan.

We remain focused on delivering the key aspects of our One Ford plan, which are unchanged.

Aggressively restructure to operate profitably at the current demand and the changing model mix.

Accelerate development of the new products our customers want and value.

Finance our plan and continue to improve our balance sheet.

And work together effectively as One Team leveraging our global assets.

Our product momentum is growing, and our leadership in quality, fuel efficiency, safety, smart design, and the very best value is resonating with consumers.

Going forward, we are entering another period of exciting new product introductions around the world such as the redesigned Ford Explorer that will redefine the SUV segment with class-leading fuel efficiency, with an improvement of more than 30% versus the current Explorer, plus industry-first safety features and technology innovations.

The new global Fiesta, already a success in Europe and Asia, is reaching showrooms now in the US.

And the new Transit Connect Electric, the first of several new Ford electric vehicles, is coming later this year.

In India, the new Figo is off to a very strong start.

In Europe, we introduced the C-MAX and the Grand C-MAX multi-activity vehicles, the first offerings off our new global C-car platform.

This will eventually underpin more than 2 million vehicles a year around the world including the new Focus that launches early next year, an important next step in our One Ford plan.

Overall, our performance this year gives us great confidence going forward, allowing us to focus on continuing to expand our business, particularly in the growth regions of the world such as China and India; improve our overall cost structure and achieve competitive costs, while strengthening further our operational excellence; and taking actions to strengthen our balance sheet and becoming investment grade.

We believe we are well positioned to deliver profitable growth for everyone associated with our Ford.

Now, we would be happy to take your questions.

Thank you, Alan.

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

We have about 45 to 50 minutes for the Q&A period.

We will begin with questions from the investment community and then take questions from the media who are also on the call.

In order to allow as many questions as possible within our time frame, please keep your questions brief.

Tawanda, can we have the first question, please?

(Operator Instructions) Patrick Archambault, Goldman Sachs.

Yes, hi, good morning.

Congratulations on a very good quarter.

I guess one place I wanted to start was just a little bit more on FMCC, which clearly came ahead of expectations.

A couple questions there.

I don't know if you said it already, but can you just remind us of what the dividend plan is?

How much there is left?

I think you had originally said $2 billion for this year.

How much of that is left?

Is there any intention to increase that just given the very strong results there?

And I guess a second question, I just wanted to get your sense of -- I realize that you said that some of the credit quality improvement aspects would be not as positive in the second half.

But I wanted to hear a little bit more about that.

Because it seems like if we look at past credit cycles, improving credit quality was indeed something that you were able to see positive tailwinds from for a while.

So wanted to get your sense of that.

Then lastly, can you talk a little bit about the impact of subprime, which has been in the press recently as being one of the factors responsible for lower than expected sales?

Obviously, we saw this large GM deal announced yesterday.

So I wanted your thoughts on that as well.

You bet.

Lewis will do the first question, then we have K.R.

with us here also and he will address your other ones.

Yes, just for clarification on the dividend, we said it would be $2 billion for the year, and there is $1.5 billion still to go.

With that, I am going to pass you over to the CFO of our strategic asset, K.R.

Kent.

Thank you, Lewis.

Patrick, on the credit quality, I will give you one perspective, and that is on the loss to receivables; and we will cover a bit more in the Fixed Income call later today.

But on a worldwide basis we had loss to receivables of 39 basis points for the quarter, which was extremely low.

In the past we've only had actually four quarters that were lower.

So for example, people are paying their bills; and it's very encouraging in an environment where you know consumers are stressed out there.

As a result of the low loss to receivables, we had to reduce our credit loss reserve.

For the first half of the year we've reduced it for about $450 million.

Our view is that it won't continue at that pace.

Obviously, the reserve just can't keep going down over time, so eventually that will slow down.

And that is what we're seeing in the second half, that that reduction will slow down.

Your last question was on subprime and how that plays into our sales.

At Ford Credit, we do support subprime.

We have always supported subprime.

It is an important part of the market for the Company to sell vehicles in that market.

Effectively, we have always participated in it.

We buy a broad spectrum of business and we have been very successful.

You can see it in our securitizations that are out there that are publicly traded.

They include subprime; they include prime; and they all perform very well.

Very good, K.R.

Thank you.

I mean just as a follow-up to that, K.R., how has subprime been behaving?

I think there is some data that has been published out there to suggest that whereas credit availability has been pretty good across the board, that is one area where it's actually tightened.

I guess the idea being that if it were sort of -- go back to more normal levels, it would obviously be favorable for sales.

I mean, what are your thoughts on that just broadly for the market?

I can really speak about it for us.

In total, we do obviously have the details that we split out and look at, subprime versus near prime versus prime in our portfolio.

But we don't typically express that on a public basis.

But in total the portfolio continues to perform very well.

That is about as far as I can go.

Very good.

Himanshu Patel, JPMorgan.

Hi, two questions.

First, I just wanted to clarify, did you say $1 billion rise in 2010 for both structural costs and also commodity costs?

Yes, both.

Okay.

What is driving the $1 billion increase in structural costs?

Is it capacity, engineering, labor?

Can you just give us some color on that?

Yes, it's a mixture of things.

It's the costs associated with increased production; so it's volume-related costs.

It's increased engineering, depreciation and amortization of the new products that we're developing for future growth.

And finally it's the advertising and sales promotion associated with the launch of some of those new products.

So it's all the things you would expect for a company that is going into a growth period and seeing its volumes increase.

So, Lewis, I mean would you think of that number sort of seeing another sizable uptick in 2011, assuming production starts rising next year as well?

Well, if production rises we will continue to see some costs associated with it.

We've got a very, very busy launch second half, so I'm not sure that I would view the launch as necessarily a running rate.

But I haven't spent a huge amount of time looking at it for next year, Himanshu.

Okay.

Can you also give us some color on European inventories?

We're seeing the Western Europe SAAR sequentially soften.

But a lot of these third-party vendors like CSM and J.D.

Power's are upgrading their European production forecast.

Where do you characterize inventories in Europe, whether it is for Ford or for industry?

And where were they at the start of the year?

Well, at the start of the year we were incredibly tight on inventories.

We have been struggling to build enough cars because the scrappage programs were so strong on small cars.

We continued in that vein through the first quarter with very tight inventories.

We would normally have an inventory build in the second quarter for two reasons.

One, because we are getting really ready for the summer shutdowns.

And secondly because we were so tight.

So we are down at about 55 days, which is a very comfortable level.

Lower than typically Europe is run at, so we feel our inventories are well under control.

Okay.

One last one, coming back to Pat's question to K.R.

You know, what was described yesterday by one of your competitors was that that asset wasn't just a good strategic fit, but it was also broadly characterized as -- the subprime market is just a very compelling growth opportunity for them.

I am just wondering how Ford and Ford Credit view the competitive landscape in subprime right now.

Have enough competitors left that space right now, and have credit trends improved sufficiently where maybe it does make sense now for Ford to try to expand penetration rates in that segment?

I think we're a bit different from some of the other people you have been talking about.

We didn't get out of the credit market.

We didn't desert any of our customers across the spectrum.

We are still supporting those customers.

We expect to continue to support those customers as they come into our showrooms.

Okay, thank you.

Brian Johnson, Barclays Capital.

Hi, two questions.

A pricing one in Europe for Lewis and then a more strategic one for Alan.

Lewis, where would you characterize within that $300 million of incentive activity the pockets that you or the kind of flashpoints for incentives?

Either by segment, BC, or by geography, country.

I would characterize it as across-the-board, Brian.

It is in most countries.

It is in most segments.

And some of the most active of our competitors I would say are more biased towards the small end of the spectrum in terms of their product range, so they had been bulking up on incentives in that area.

I think an important message for what we're doing in Europe is we are backing away from chasing some of our competitors down the very, very high levels of incentives for business that we don't think is necessarily real.

And you can see that at the end of each month.

The year-over-year incentive level is up.

But since we saw the volumes coming down in the second quarter, we have really backed away from some of this business that people have started indulging in.

And our per unit margin, actually second over first, you can't see it in the data, is up modestly, which I think implies that we are doing the right thing for our business.

We are pursuing profitable business, not market share business.

Okay.

Is there any particular country that accounted for the bulk of that $300 million, or two countries?

No.

It's spread pretty even, unfortunately.

A question probably for both of you and Alan, which is how do you see the light commercial van vehicle business developing in Europe and Brazil, where you're active?

As well, is that an entree for you to grow in China?

Is that going to be a bigger part of your business going forward, say over the next three years?

Well, the commercial vehicles down to the Transit size and the Transit Connect have been, as you know, a wonderful business for us; and we see that continuing to grow in all the regions of the world -- the Americas, Europe, and Asia Pacific.

We don't have any plans at the current time to go below that size, Brian.

Okay, I meant LCV, light commercial vehicle.

Yes, we do see some encouraging signs in Europe of commercial vehicle business, some signs of life there.

Europe we are very, very strong.

It's not called the Transit segment for nothing.

And we are working with our partner in China, who has a good Transit business and we'll continue to develop the Transit business.

We've got a great low-cost production facility in Turkey, and we still build vehicles in Britain as well.

Yes, very good for us.

Okay.

How much of the South American, European decent profits were really driven by LCVs?

Especially in Europe with a weakening, as you pointed out, car market.

I wouldn't want to go into that amount of detail, Brian.

Thank you for asking, though.

Okay.

John Murphy, Bank of America Merrill Lynch

Good morning, guys.

Maybe a very basic question but I think an important one as you guys are talking about cost inflation and structural cost going up.

Is it fair to say -- and how do you think about, when you launch new products, that they are higher margin than outgoing products?

I mean, is that a fair assumption?

I assume as you launch a new product you expect it to be higher margin and plan for it to be higher than the outgoing product, even though there might be some cost inflation as we are going forward.

Well, that's a multifaceted question.

Let's just talk about the structural costs.

If we build more of them, we expect to attract some structural costs associated with it.

Right in the very beginning of a new product launch you have some specific structural costs associated with high levels of depreciation and amortization at the beginning of the cycle; the launch expense in the plants and the advertising and sales promotion.

In terms of the margins, we are going through a period where we're improving the competitiveness of our products and improving -- as part of that improving the attributes and equipment levels of our products.

That's the thing that is driving the positive performance on pricing, with closing the gap with our Asian competitors in the US, for example, because we've got much more competitive products.

Along with that does go some increased material costs.

But typically we would be looking at the start of a cycle to have a better margin than on the last job of the previous cycle.

Okay.

Then the second question is, on slide 14 when you go through the walk for North America.

There was no mention -- and I may have missed this, but it's not on the slide deck -- of what warranty expense did in the quarter, or what your warranty performance was in the quarter, and if it was negligible.

Or do you expect that to improve going forward?

and just more color around warranty expense in North America.

We're looking at our data.

Just one second, John.

It's a very small amount of good news, so not material in terms of the big variance explanations.

Okay.

We did have -- you did see in the European numbers that, based on the very good warranty performance, they were able to adjust the reserve in the quarter.

Thank you.

Chris Ceraso, Credit Suisse.

Thank you.

Good morning.

I would say probably the thing that to me was the most surprising and most impressive was the price performance in the quarter.

I have a couple of questions on that.

First, what is your expectation for pricing as we get into the second half, if I think in terms of your year-to-year profit walk, like you were just talking about from slide 14?

And then what do you see as any risks to the pricing story?

Be it your product mix or introductions or any kind of competitive actions.

Well, we have talked a lot about our pricing improvements being driven by improved products.

We obviously have a lot of improved products coming in the second half.

We don't expect to maintain the performance we saw in the first half, but we do expect to continue to see positive net pricing.

And included within that we do expect to see incentives continue to ameliorate a little bit as our products get more and more competitive.

And, Chris, we are also absolutely staying laser focused on our plan to match our production to the real demand, which is the most important thing we do from a value point of view in the products.

Your question I think was primarily aimed at North American market.

But I think the steps we are taking in Europe, not to chase the marginal units, is also an important evidence of the way we are trying to run the business, sort of responsibly.

On the increase in commodity costs, the $1 billion, you used to talk in terms of both commodity and product cost.

Is there some breakdown within the $1 billion, or is it all just really just raw materials?

Or is some of that the increased content that is going in to make these new products better?

No, the $1 billion is raw material.

The usual suspects -- steel, aluminium or aluminum, and copper and the like.

So where do we see -- where are we missing the increase in the actual content, be it for regulatory or just for better components, to be more competitive?

You are seeing it offset by material cost reductions.

So it is the dog that isn't barking.

Then just lastly a housekeeping item.

You mentioned, Lewis, that taxes would normalize at some point here.

When do we start to see the average tax rate start to creep up?

We are not ready to talk about that yet, Chris.

Okay, thank you.

Steve Dyer, Craig-Hallum.

Thank you.

Good morning.

Nice quarter, guys.

Just a question.

You know, your guidance for Q3 North American production I would have thought I guess -- given the low inventory and your market share gains and just the continuing improvement in the industry -- I would have thought that there would maybe not be quite as much seasonality as you are indicating.

What are you seeing there that leads you to be -- to expect things to be as normal?

Well, it really starts with our assessment on the economic growth, and of course the industry, the 11.5 million to 12 million; and then staying really focused on the right inventory and supply with the dealers.

So we have worked a little bit of that in the production in the first half to make sure that, with the shutdowns that we normally take and the new product launches that we are matching that production to demand.

So it's about, right, looking at the market and looking at us gradually increasing market share too.

What is your expectation as to what a new-normal inventory level will look like vis-a-vis historical?

I think over time it will gradually --

Come down.

Come down.

As we simplify within the product lines, as we simplify our product offerings, we believe we can get closer to the customer and run lower inventories.

But it's going to take some time for us to get there.

Long time -- long term we want to move from -- I think typically we planned around 60 to somewhere maybe 5 to 10 days lower than that.

We are very encouraged with the progress we're making because not only have we simplified the product lineup and made that really clear, but also we are continuing to simplify the orderable combinations to get really packaged the way the customers really want it.

That allows the dealers to really simplify their operations.

Okay, all right.

Thank you.

Colin Langan, UBS.

Good morning.

Looking at slide 12, what was the explanation for the positive exchange impact and the net interest adjustment?

I was actually surprised exchange would be positive.

The exchange positive news is the nonrecurrence of bad news last year, which was a balance sheet revaluation because of exchange rate movements.

And I am sorry, your second question was about interest?

Yes, the net interest and fair market value adjustments that offset that?

There a couple of things.

One, our interest has gone up because we've got the VEBA debt on our books compared to last year.

And the second element is our fair market value adjustment for our investment in Mazda has gone down.

I think last year during the quarter it was going up, and this year during the quarter it was going down.

So the year-over-year looks somewhat exacerbated.

On the exchange side, should we expect similar benefits in the second half?

Or is exchange going to be a headwind there?

No, this was -- we did have a big chunk in the second quarter last year, so we are not expecting it.

Who knows what you expect on exchange rates?

But based on present planning assumptions, we don't expect a big item like this in the second half.

It was just a year-over-year issue; okay.

And can you talk about Europe in the second half?

Pricing is getting tougher.

Production is going to be down.

Can you stay profitable in Europe?

Or just any sort of color on that?

Well, we're not giving guidance.

I think you can see that we are going to run the business to be profitable.

If we have to yield a little bit of market share to not do business that is unprofitable, we will do that.

We will give you a performance report as we go along.

Just one last one.

I guess there is a lot of news around the funding, asset-backed funding for Ford Credit.

Is that a change in your policy of how you're going to fund that business?

Or do you think that should be a timing issue?

A couple of things.

First of all, we have our Credit Company well funded and a very diversified funding strategy for the Credit Company.

And over -- last night, we did get a No Action letter from the SEC that I think will give us some solutions for the next six months to enable us to go into the public asset-backed market.

Okay.

Clearly that was an unintended consequence of the new legislation.

So we are very, very confident that they will get that straightened out quickly.

There is a lot of energy from everybody to find a solution, and we were very pleased with last night.

Okay, great.

Thank you very much.

Rod Lache, Deutsche Bank.

Good morning, everybody.

First, I just want to talk a little bit more about this 11% margin that you achieved in North America.

I know a few analysts have asked about whether there were unusual exchange items or warranty items in there.

I guess just more broadly, were there any unusual items in there?

Was mix unusually strong?

Any thoughts about the sustainability of the business?

Obviously, you do have some costs coming in; but there is a lot of operating leverage in the business as the cycle recovers.

Yes, Rod, I think the only unusual thing is looking at the margins by quarter are quite dangerous.

Because second quarters are very full production quarters typically.

So we don't expect to stay at an 11% margin.

But we look at it more on a -- it's more instructive I think to look at it on an annual basis and see the trends there, rather than -- there is a lot of noise quarter-to-quarter that isn't signals.

And getting out of the seasonality effects, as you well know.

Right, right.

And the costs, obviously, would be coming up as the market recovers.

Which is good.

I haven't seen the numbers on Ford Credit yet.

But I did see the year-over-year variances in the credit loss provisions.

Can you just tell us what those provisions were in the quarter?

Was that a negative number this quarter?

I will ask K.R.

to answer that.

Yes, actually it was an improvement.

The credit losses themselves were about $86 million.

The reserve adjustment was a reduction of $252 million.

And then there is a little bit of exchange and securitization rolling through as well.

So the expense item was a negative $252 million?

Am I hearing you correctly?

Sorry, the credit losses themselves were $86 million expense, and then the changing reserve was a $252 million reduction in the reserve.

So that's good.

Okay, okay.

Just lastly there was a lot of discussion I guess over the past couple days about the opportunity in leasing.

Part of it because of what has been happening in the residuals and partly also with AmeriCredit and the news yesterday.

I'm just curious about what it is your penetration of leasing at the moment?

The industry looks like it's around 21% lease.

Is that something that you are viewing as an opportunity right now?

We're not -- we don't share our penetration and we haven't been out of the leasing business.

We continue to satisfy the customers who want leasings.

Thank you.

Itay Michaeli, Citi.

Great.

Thanks, good morning.

Just two questions on the 2011 outlook.

Can you maybe directionally share what you're assuming there for net pricing year-over-year?

Also, it was interesting to see that you expect continued cost structure improvements.

Does that mean that the Automotive structural costs just don't increase at the same rate that we maybe saw them increase this year?

Maybe if you have any color on that.

With respect to your first question, we are pretty much aligned on the GDP growth projections that people are making.

We just -- the US just updated their guidance at 3% to 3.5% for 2010 and then moving to closer to 4% maybe in 2011.

So with that and the industry moving along with that, and our increasing position on share, that kind of outlines still the slow growth with respect to past recessions.

But clearly a really positive thing that we are growing.

On the pricing itself, our real plan is to continue to offer the quality and the fuel efficiency and the safety and the smart design that people really do want and value.

So we anticipate that the consumers -- like they are now -- really appreciate and resonate with the new product line.

And as we continue to refresh our vehicles to get to the freshest product line, we anticipate that the customers will continue to appreciate the Ford and pay for the features that they really like.

Great.

It's too early for us to give detailed views of next year.

We would expect the pricing component probably to be somewhat less than it has been this year, and we are going to continue to work on our cost competitiveness.

Great.

On the net debt guidance for the year, obviously impressive outlook there.

Lewis, can you maybe help us directionally of where you think net debt could end 2010?

Just want to get a better sense of some of the seasonal cash flow that you are expecting in the second half of this year.

What a great question.

Somewhere between 5.4 and zero.

Okay.

I'm not going to tell you where the intersection point is.

Okay.

We will try to do our math ourselves.

Thanks a lot, guys.

Just I'll remind you that we still have about somewhere between $300 million and $350 million of the dribble out that we previously declared.

But the rest of the net debt this year we are certainly expecting to be doing whatever we do through continued great performance out of the operating business.

Sure, absolutely.

Ladies and gentlemen, at this time we will now welcome questions from the media community.

(Operator Instructions) Dee-Ann Durbin, Associated Press.

Good morning, everyone.

As Lewis said, your Company is going into a growth period.

I am wondering if you plan to hire any new employees or if you feel that your staff is at this point the appropriate size.

Well, again, we absolutely look forward to that point because that clearly will show that we will reflect in our growth.

In the near term, we are about where we need to be and we continue to work our productivity.

It really is going to depend on how fast the economy comes back and the industry comes back.

But we are in a good position right now, but we look forward to that day.

Thank you.

Also, Lewis, could you give the total quarterly incentive spending from last year?

You said it was up this year; but how much?

Up from the $300 million?

Hold on, I think we are confusing some numbers here.

Just ask me the question again, Dee-Ann.

The total of quarterly incentive spending?

You gave the $300 million figure for the quarter.

I don't recognize a 300.

That's Europe.

Our total incentive spending was down $200 million for the Corporation.

Oh, down $200 million.

Yes, and we wouldn't give out the absolute.

Okay, but you were down?

We were down $200 million for the Corporation.

Within Europe because of the high level of incentive spending, Europe is up the year by $300.

Okay, got you.

Thank you.

Keith Naughton, Bloomberg.

Hi, guys.

I am wondering if you could tell me what discontinuing Mercury will cost.

Well, we have been pretty clear in the specials that we said it will be -- that the amount we showed in the specials, which includes not just Mercury but include some other dealer restructuring, the amount we show here is somewhat less than half the total amount we expect to book in 2010 and 2011.

We are not being any more explicit than that, Keith.

Then conversely, how much more are you planning to invest in Lincoln?

Well, we are going to invest in Lincoln what it takes to deliver the product programs.

You will see us -- we don't split out our CapEx and our engineering by brand.

But you will -- you see this year our CapEx going up year-over-year, and you will see us continuing to increase our CapEx as we go into this growth period.

And we've got this plan for seven new or refreshed products in the next four years.

And the investment for all of that is in the guidance for '10 and '11 also, Keith.

Just to reflect on Mercury, the plan is in place; we are having very fruitful discussions with our dealers.

I think there are about 1,700 dealers involved, and I think we already have signed agreements with about 700 of them.

Have there been any lawsuits?

No.

Great.

Thank you very much.

(Operator Instructions) Brent Snavely, Detroit Free Press.

Hello, everybody.

Wanted to see if you could talk a little bit more about going from the net debt to the net cash position sometime next year.

And how you are doing that and how significant that is for the business.

It's clearly a really positive development because we are managing our uses of cash, and we are looking at the overall business environment, and it appears to us -- with all of our fundamental assumptions -- that we are going to be able to continue to improve the balance sheet and pay down the debt.

That is why we are very pleased to give the guidance that we will be in a net positive position in cash at the end of next year.

Great.

Then related --

I just wanted -- because I misspoke a little bit earlier when I talked about the operating divisions and didn't explicitly call out.

Obviously the dividends from Ford Credit are a big help to our continuing to pay down our net debt.

So it is both the Automotive business units and Ford Credit.

Good.

Then, I also saw on employment -- it looked like North American workforce increased by about 2,000 people from the first quarter to the second quarter.

Can you talk about that?

Are you guys hiring?

Plan to continue hiring?

Yes, that really reflects adding the Explorer to Chicago, where we are going to add 1,200 new jobs.

And also -- I think that is enough for now.

But that wouldn't happen until later on this year?

Right, and Mexico.

Yes, it includes some hiring for the Fiesta.

Yes, in Mexico.

Okay.

Bernie Woodall, Reuters.

Hi, thank you.

Wanted to -- you just mentioned the Fiesta, but where are you with the launch of the Fiesta in North America?

And have you run into any glitches?

No, we're off to a really good start.

The acceptance by the consumers is fantastic.

The dealers want more as fast as they can get them.

We had a very slight transportation glitch with some damage to some rail lines, but other than that we are on track.

Where was this transportation glitch, Mr.

Booth?

I don't know.

I'm not the rail expert.

It was I think on the Mexico side of the border.

But all okay on the production side?

We're okay on the production side.

Absolutely.

The cars look great, actually.

All right.

Well, good luck.

Thank you very much.

Ladies and gentlemen, at this time we have no further questions in queue.

I would like to turn the call over to management for closing remarks.

Okay, thank you very much, Tawanda.

I guess that concludes today's presentation.

We would like to thank all of you for joining us here today.

Thank you for joining today's conference.

That concludes the presentation.

You may now disconnect and have a wonderful day.