福特汽車 (F) 2010 Q3 法說會逐字稿

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

My name is Steve and I will be your operator for today.

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

We will be conducting a question-and-answer session towards the end of today's call.

(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, Steve, 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 KR 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 strong third-quarter results as we continue to gain momentum with our One Ford plan despite still challenging business conditions.

This marks our fifth consecutive quarter of pretax operating profits.

Ford earned a pretax operating profit of $2.1 billion in the third quarter and $7 billion through the first nine months of 2010 excluding special items.

These results were driven by strong performance by North America and Ford Credit.

We expect to continue to deliver solid results again in the fourth quarter and continued improvement in 2011.

We generated positive Automotive operating-related cash flow of $900 million in the third quarter and $3.4 billion through the first nine months.

The driving force behind our progress is our vastly improved product line of small, medium, and large, cars, utilities, and trucks around the world with the very best quality, fuel efficiency, safety, smart design, and value.

The strength of our business positions us to profitably grow by adding new products and capacity in key markets around the world and further strengthen our balance sheet.

Today we are announcing further actions to reduce Automotive debt.

During the third quarter we paid down $2 billion on our revolving credit line.

On Friday we will use cash to fully pre-pay the remaining $3.6 billion of debt we owe the VEBA retiree healthcare trust.

In addition, we expect to further reduce Automotive debt through conversion offers on two of our convertible debt securities.

Lewis will provide more detail about these actions later in the presentation.

Even without the benefit of the conversion offers we now expect our Automotive cash to be about equal to our debt by year-end, earlier than we previously expected.

This will be an improvement of $8 billion to $9 billion from the end of last year.

Overall, we are moving from fixing the fundamentals of our business and weathering the downturn to growing the business profitably around the world.

I will start off by providing you with an overview of our financial results and business and product highlights.

Then Lewis 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 three, I will review our key financial results compared with a year ago.

Let me first begin by explaining how Volvo impacts our results.

We completed our sale of Volvo to Geely on August 2, 2010.

Volvo's 2010 results through the sale date were reported as special items and excluded from our wholesales, revenue and our operating results.

2009 results include Volvo.

As shown at the top of the slide, third-quarter vehicle wholesales were 1.3 million units up 15,000 units.

The increase was explained primarily by higher wholesales in North America and Asia Pacific and Africa, offset partially by the exclusion of Volvo from 2010 and lower wholesales in Europe.

Excluding Volvo from 2009, the wholesale increase was 91,000 units.

Our third-quarter revenue was $29 billion, a $1.3 billion decrease.

The change in revenue primarily reflects higher volumes and favorable net pricing more than offset by the exclusion of Volvo from 2010, lower Ford Credit receivables, and unfavorable currency exchange.

Excluding Volvo from 2009 our revenue increased by $1.7 billion.

Our third-quarter pretax operating profit, excluding special items, was $2.1 billion or $0.48 per share, a $1.1 billion improvement.

Automotive results improved by $953 million and Financial Services results improved by $100 million.

Our third-quarter net income attributable to Ford, including unfavorable pretax special items of $168 million, was $1.7 billion or $0.43 per share, a $690 million improvement.

For the first nine months pretax operating profit, excluding special items, was $7 billion, an $8.6 billion improvement, and net income attributable to Ford was $6.4 billion, a $4.5 billion improvement.

In addition, we ended the quarter with $23.8 billion of Automotive gross cash.

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

During the quarter we continued to invest for growth in emerging markets furthering our plan to strengthen our business around the world.

Last month we announced a $500 million investment along with our joint venture partners in China for a new engine plant in Chongqing.

The facility will more than double our engine making capacity at this site.

In August Ford, along with Mazda, announced we will invest $350 million in the AutoAlliance Thailand joint venture plant for production of the next-generation compact pickup trucks.

We also announced plans to launch eight new vehicles in India by mid-decade and export the Ford Figo from India to 50 markets.

As a result of the competitive agreements at several of our US plants, we announced our plan to bring in-house approximately 2,000 hourly jobs.

On August 2, we completed the sale of Volvo to Geely representing another step to implementing our One Ford plan.

And we continue our plan to reduce our debt, paying down $2 billion of the drawn amount of the revolving credit line.

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

Last month at the Paris Auto Show we revealed a full family of Focus body styles including the global Focus ST and SYNC for Europe.

The new Focus begins rolling out in North America, Europe, and Asia Pacific and Africa starting next year.

In the US the new Ford Edge and Lincoln MKX went on sale with MyFord Touch and MyLincoln Touch technology.

In Thailand Ford launched sales of the Fiesta and we continue introducing the vehicle across Asia and the Americas.

Another key highlight of the quarter came in July when we unveiled the reinvented Explorer SUV with more than 30% fuel economy improvement over the current model.

The vehicle goes on sale in North America later this year.

We also announced a new family of F-150 powertrains that will deliver improved fuel economy and capability over the current model.

In Europe, we launched the sale of the all new C-MAX and the refreshened Mondeo.

And the 2010 US model lineup earned eight top safety picks from the Insurance Institute for Highway Safety.

Ford has the most top safety picks of any automaker.

Now I will turn it over to Lewis to provide even more detail on our third-quarter financial results.

Thanks, Alan.

Let's move on to slide seven to summarize our financial results compared to the year ago.

Our third-quarter pretax operating profits, excluding special items, was $2.1 billion, a $1.1 billion improvement.

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

Our pretax offering profit excluded unfavorable special items of $168 million which we will cover on the next slide, and we recognized $199 million of tax expense in this quarter.

As we mentioned in the last quarter, our current low effective tax rate is primarily a result of our valuation allowance against the deferred tax assets.

Sustained levels of profitability are expected to lead to a reversal of this valuation allowance which could occur as early as the second half of next year.

This will result in the accrual of tax expense at more normalized rates approaching the US statutory tax rate of 35%, which will impact our earnings per share calculation.

Importantly, the reversal of the valuation allowance will not affect our cash tax payments but should remain low for a number of years.

On the bottom line, third-quarter net income attributable to Ford was $1.7 billion, a $690 million improvement.

Slide eight covers special items, which were an unfavorable pretax amount of $168 million in the third quarter.

We recorded $33 million of personnel and dealer-related charges.

And, as Alan mentioned, we completed the sale of Volvo to Geely on August 2 and recognized $102 million of charges reflecting primarily pretax operating results through the sale date, loss on sale, and other related charges offset partially by a cessation of depreciation.

Lastly, we recognized $33 million of foreign currency translation charges related to non-core foreign subsidiary liquidations.

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

Total company third-quarter pretax operating profit was $2.1 billion.

This includes a profit of $1.3 billion for the Automotive sector and a profit of $761 million from Financial Services.

And as shown in the memo, total company third-quarter pretax operating results improved by $1.1 billion compared with a year ago.

Compared with the second quarter 2010, third-quarter pretax operating results decreased by $887 million explained primarily by lower Automotive sector profits which we will cover on a later slide.

Let's move to slide 10 which shows third-quarter pretax operating results for each of our Automotive segments and Other Automotive.

Total Automotive sector pretax operating profit was $1.3 billion.

Although not shown, operating margin, defined as Automotive pretax operating profits excluding Other Automotive divided by Automotive revenue, was 6.2%, up 3.3 percentage points from a year ago.

We will discuss Other Automotive on this slide and cover the Automotive segment in more detail on the upcoming slides.

The third-quarter Other Automotive loss was $369 million.

This includes net interest expense of $346 million, which was comprised of $415 million of interest expense offset partially by interest income.

In addition, there were $23 million of unfavorable fair market value adjustments primarily related to the impact of changes in exchange rates on intercompany loans.

As shown in the memo, the non-recurrence of Volvo's prior-year losses improved our pretax operating results by $136 million compared with a year ago.

Slide 11 shows the change in third-quarter pretax operating results compared with 2009 by causal factor.

Overall, third-quarter results increased by $1 billion compared with a year ago.

Volume and mix was $600 million favorable explained primarily by mix, the non-recurrence of prior-year's stock reductions, and market share improvements.

Net pricing was $400 million favorable explained primarily by improvements in North America reflecting selective pricing.

Costs increased by $300 million reflecting primarily higher structural cost to support volume and growth of our product plans and higher commodity costs, offset partially by material cost reductions and favorable warranty reserve adjustments.

Exchange was $200 million favorable, reflecting primarily the non-recurrence of an unfavorable prior-year balance sheet revaluation in North America.

Net interest and fair market value adjustments were $100 million unfavorable, explained by the higher interest expense associated with the VEBA debt added at the end of 2009.

Volvo's impact represents the change in reporting as previously mentioned.

As shown in the memo, the $800 million decrease compared to the second quarter 2010 was more than explained by lower volume and unfavorable exchange.

The volume declined of 165,000 units in part reflects the normal seasonality of our business.

These changes were offset partially by favorable net pricing and lowered net interest expense as a result of our debt reduction actions.

For the next section of slides we will cover each of the Automotive segments starting with North America on slide 12.

In the third quarter wholesales were 592,000 units, up 90,000 units from a year ago.

The impact of this volume change will be discussed in more detail on the next slide.

Third-quarter US total market share for Ford, Lincoln, and Mercury was 15.9%, up 1.3 percentage points from a year ago which will be discussed in more detail later.

Third-quarter revenue was $16.2 billion, a $2.8 billion increase from a year ago explained primarily by higher volumes and favorable net pricing.

And for the third quarter North America reported a pretax operating profit of $1.6 billion, a $1.3 billion increase from a year ago.

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

Although not shown, the third-quarter operating margin was 9.8%, up 7.5 percentage points from a year ago.

Slide 13 provides an explanation for the change in North American results compared to 2009 by causal factor.

Volume and mix was $700 million favorable, reflecting primarily higher US market share and the non-recurrence of prior-year stock reductions.

Dealer inventories during the third quarter of 2010 were flat compared to the second quarter, reflecting our plans to match production to market demand.

Net pricing was $400 million favorable reflecting primarily selective pricing consistent with the success of our full range of products in the marketplace and continued discipline on incentive spending.

Costs decreased by $100 million, explained primarily by material cost reductions and favorable warranty reserve adjustments offset partially by higher structural and commodity costs.

Exchange was $100 million favorable and reflects primarily the non-recurrence of an unfavorable prior-year balance sheet revaluation.

And as shown in the memo, the $300 million decrease compared to the second quarter 2010 primarily reflects lower volumes offset partially by lower costs including favorable warranty reserve adjustments.

Slide 14 shows US market share for Ford, Lincoln, and Mercury.

In the third quarter US total market share was 15.9%, up 1.3 percentage points from a year ago , more than explained by higher market shares for the F-Series, both the F-150 and the new Super Duty, Taurus, Fiesta, and the Edge.

Compared with the second quarter US total market share is down 1 percentage point, reflecting the seasonality impact of industry fleet mix.

US retail share of the retail industry was an estimated 14.2% in the third quarter, up 1.4 percentage points from a year ago.

Although not shown, Canada total market share in the third quarter was 18.2%, up 2.3 percentage points from a year ago.

Ford of Canada continued to maintain leadership in the market and posted its best September performance in more than 30 years.

Continued consumer awareness of Ford's improvements in quality and fuel efficiency are driving strong consideration and demand for Ford products, which has enabled us to achieve market share gains and improve net pricing.

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

Now on to South America on slide 15.

In the third quarter wholesales were 116,000 units, up 8,000 units from a year ago, more than explained by higher industry volume offset partially by our decrease in dealer stocks and lower market share.

The reduction in dealer stock levels from the second quarter reflects a return to market demand levels after the July plant shut downs.

Third-quarter market share was 9.6%, down 0.2 of a percentage point from a year ago, reflecting primarily lower production in Venezuela offset partially by share gains in Brazil.

Third-quarter revenue was $2.5 billion, a $400 million increase from a year ago, reflecting primarily higher volumes and favorable net pricing.

For the third quarter South America reported a pretax operating profit of $241 million, a $6 million decrease from a year ago, explained primarily by higher commodity costs offset partially by favorable net pricing.

Although not shown, the third-quarter operating margin was 9.6%, down 2.2 percentage points from a year ago.

Slide 16 covers Europe.

In the third quarter wholesales were 340,000 units, down 53,000 units from a year ago.

The impact of this volume change will be discussed in more detail on the next slide.

Third-quarter industry SAAR for the 19 markets that we track was 14.5 million units, down 1.7 million units from a year ago as the scrappage program has ended.

Third-quarter market share was 8.4%, down 0.8 of a percentage point 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 the favorable effects of scrappage programs on our small car sales.

Third-quarter revenue was $6.2 billion, a $1.1 billion decrease from a year ago, reflecting lower volumes and unfavorable currency exchange.

And for the third quarter Europe reported a pretax operating loss of $196 million, a $327 million decline from a year ago.

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

Slide 17 provides an explanation of the change in Europe results compared to 2009 by causal factor.

Volume and mix were $200 million unfavorable, reflecting lower industry volumes and market share.

Net pricing was unchanged.

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

Costs increased by $200 million, more than explained by higher structural costs, driven primarily by product launch and engineering spending and higher commodity costs.

As shown in the memo, the $500 million decrease compared to the second quarter 2010 primarily reflects lower industry volumes, planned stock reductions to match market demand, and higher costs including the non-recurrence of favorable prior-year warranty reserve adjustments.

These changes were offset partially by favorable net pricing, reflecting lower incentive spending.

Slide 18 covers Asia Pacific and Africa.

In the third quarter wholesales were 205,000 units, up 46,000 units from a year ago, reflecting primarily strong industry growth in China and India and market share improvements.

Third-quarter industry SAAR was 31.2 million units, up 4.6 million units from a year ago, explained primarily by increases in China and India.

Third-quarter market share was 2.6%, up 0.3 of a percentage point from a year ago, reflecting primarily share gains in India driven by the new Ford Figo.

Third-quarter revenue, which excludes sales of our unconsolidated China joint venture, was $1.8 billion, a $300 million increase from a year ago more than explained by higher volumes.

For the third quarter Asia Pacifc and Africa reported a pretax operating profit of $30 million, an $8 million increase from a year ago, explained primarily by higher industry volumes and material cost reductions offset partially by higher structural costs to support investment in our product and growth plans and market mix shifts from mature to emerging markets.

Slide 19 shows Automotive gross cash and operating-related cash flow.

We ended the third quarter with $23.8 billion in Automotive gross cash, up $1.9 billion from second quarter 2010.

Our Automotive operating-related cash flow was $900 million positive in the third quarter, reflecting an Automotive pretax operating profit of $1.3 billion, capital spending during the quarter of $900 million equal to depreciation and amortization, other timing differences of $200 million unfavorable, and payment of $200 million to Ford Credit reflecting upfront payments of subvention.

Other major changes in the third-quarter Automotive gross cash included receipts from our Financial Services sector of $1 billion.

This is part of Ford Credit's revised plans to make $2.5 billion of cash distributions to Ford in 2010, up from our previously announced $2 billion.

Through the first nine months of 2010 $1.5 billion of this amount has been remitted.

Net debt reduction actions during the quarter included further paying down our revolving credit line by $2 billion.

And we used $300 million of the cash proceeds for the sale of Volvo to partially repay our secured term loan.

These reductions were offset partially by a receipt of government loans for the development of more fuel efficient vehicles.

Equity issuance proceeds of $400 million related primarily to the completion in September of our previously announced plan to issue up to $1 billion of equity.

And as previously announced we completed the sale of Volvo for $1.8 billion, of which $200 million was paid in the form of a note and the balance in cash.

As a result of estimated purchase price adjustments of $300 million, on August 2 we received $1.3 billion in cash.

Final purchase price adjustments are expected to result in additional proceeds to Ford.

Other cash changes of $400 million primarily reflect the exclusion of Volvo's cash balances as a result of its sale.

Slide 20 summarizes our Automotive sector's cash and debt position.

Our Automotive gross cash was $23.8 billion as of September 30 and at the end of the third quarter Automotive debt was $26.4 billion.

Although not shown, $1.3 billion of this balance will come due within the next 12 months.

Our gross cash net of debt as of September 30 was $2.6 billion negative, improved from $5.4 billion negative as of June 30.

And as shown in the total number, total liquidity including available credit lines was $29.4 billion.

This liquidity includes $5.1 billion of available capacity under our secured revolving credit lines and about $500 million of other affiliate's automotive credit lines.

In addition, as Alan mentioned, today we have announced further actions to be completed in the fourth quarter of this year to reduce our debt and strengthen our balance sheet.

On Friday we will use cash to full prepay the remaining $3.6 million of debt we owe the VEBA retiree healthcare trust.

This will lower ongoing annual interest expense by about $330 million.

As shown in the pro forma column, this will reduce our total debt to $22.8 billion, a net reduction of $10.8 billion from year-end 2009.

This net reduction will lower our ongoing annual interest expense by around $800 million.

In addition, we have launched conversion offers for our senior convertible debt securities of which $3.5 billion is outstanding and $2.6 billion is carried as debt on the September 30, 2010, balance sheet.

Holders will be offered a cash premium as an inducement for them to convert the debt into shares of Ford common stock.

Our debt and interest expense will be reduced to the extent holders elect to accept this conversion offer.

Completion of the conversion offers in the fourth quarter, however, will result in special items charges associated with the cash premium and the non-cash loss related to the debt retirement.

Any shares issued under these conversion offers are already reflected in our fully diluted earnings per share calculation.

As Alan mentioned, even without the benefit of the conversion offers, we now expect our Automotive cash to be about equal to our debt by year-end, earlier than previously expected.

Now let's turn to slide 21 on Financial Services.

For the third quarter our Financial Services sector reported a pretax operating profit of $761 million, a $100 million increase from a year ago and a $114 million decrease compared to the second-quarter 2010 as shown in the memo line.

For the third quarter Ford Credit reported a pretax operating profit of $766 million, a [$89 million] (corrected by company after the call) increase from a year ago, which we will cover in more details on the next slide.

Slide 22 provides an explanation of the changes in Ford Credit results compared with 2009 by causal factor.

Volume was $100 million unfavorable reflecting declining receivables.

As shown in the memo, Ford Credit's managed receivables at September 30, 2010, were $85 billion, $9 billion lower than a year ago.

This decline primarily reflects the transition of Jaguar, Land Rover, Mazda, and Volvo financing to other finance providers and the decline in industry volume over the past few years.

The decline in the provision for credit losses of $200 million primarily reflects improved charge-off performance.

The reduction in credit loss reserves this past quarter was about the same as the reduction in the third quarter of last year.

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

And Other decreased by $100 million, reflecting primarily the non-recurrence of prior-year net gains related to unhedged currency exposures.

As shown in the memo, the $100 million decrease compared to the second quarter 2010 is more than explained by smaller expected improvements in the provision for credit losses and depreciation expense for the leased vehicles.

Based on these same factors, we expect fourth-quarter 2010 results to be lower compared with recent quarters.

For full-year 2011 we expect Ford Credit to be solidly profitable but at a lower level in 2010 reflecting primarily the non-recurrence of lower lease depreciation expense and the non-recurrence of credit loss reserve reductions of the same magnitude as 2010.

The non-recurrence of lower lease depreciation expense related to lower gains associated with recovering a portion of the operating lease impairment for 2008 as leases terminate and vehicles are sold.

We will also have fewer lease vehicles terminate in 2011 compared with 2010 resulting in fewer vehicles sold at a gain.

And likewise, we expect the credit loss reserve will begin to level off in 2011 resulting in less reserve releases than we experienced in 2010.

As previously discussed, Ford Credit is projecting distributions of about $2.5 billion to its parent during 2010.

Slide 23 covers the liquidity and funding outlook for Ford Credit.

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

Ford Credit's liquidity exceeded utilization by about $25 billion, up about $4 billion from the second quarter.

Ford Credit remains on track to fund its business, completing about $8 billion of funding in the third quarter and about another $2 billion in October.

Our credit spreads continue to tighten reflecting our improved credit profiles, strong investor demand for our transactions, and supportive markets.

Ford Credit renewed $5 billion of committed capacity consistent with our plan and at lower cost in prior renewals.

Our funding strategy remains focused on access to public and private securitizations, asset-backed commercial paper, and unsecured debt.

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

At the end of the third quarter Ford Credit's managed leverage was 6.3-to-1 and equity was $10.9 billion.

Slide 24 covers our fourth-quarter production plans -- fourth-quarter 2010 production plans.

In North America the fourth-quarter production schedule is 590,000 units, up 16,000 units from a year ago and up 20,000 units from our prior guidance.

In South America the fourth-quarter production schedule is 124,000 units, unchanged from a year ago.

And for Europe we expect fourth-quarter production of 400,000 units, down 57,000 units from a year ago, reflecting the decline in industry volume.

For Asia Pacific we expect fourth-quarter production of 233,000 units, up 68,000 units from a year ago, to support new products and growth in the region.

Overall, we expect total company fourth-quarter production to increase by 27,000 units from a year ago, reflecting continued strong customer demand for our products offset partially by lower industry volumes in Europe.

Compared to the third quarter, our fourth-quarter production is up 89,000 units reflecting the normal seasonal increases from our annual shutdowns, new product launches, and projected industry growth as economic conditions improve.

Overall, our production plants are consistent with our strategy to match supply to demand.

Now I would like to turn it back to Alan to summarize our 2010 outlook and our plan

Thank you, Lewis.

Slide 26 provides an overview of the business environment.

Although economic activity across our major markets remains uneven, the global economic recovery continued in the third quarter.

Growth in China, India, Brazil, and Turkey, as well as in Germany and Canada, has been strong whereas in the US and some of the other European countries growth is on a more modest recovery path.

Consumer spending gains have been hampered by a slow pace of employment growth and ongoing weaknesses in housing and credit markets.

Policies are being put in place to meet these challenges.

Many Central Banks in countries with solid growth have begun to tighten monetary policy to ward off inflation pressures.

In addition, China is addressing property price increases through other policy measures.

Additional fiscal stimulus to support growth is unlikely given budget constraints in the US and in Europe.

In fact, fiscal tightening will be a drag on growth in many European markets.

Continuing weak growth, however, does raise the potential for additional monetary policy stimulus by the US Federal Reserve, the Bank of England, and European Central Bank.

Commodity prices are significantly higher than last year's lows.

Crude oil prices rose to $80 per barrel, about double last year's lows.

This year's global industry volume is projected to be 70 million units, up about 8% compared with last year's level of 65 million units.

Overall, the global business environment remains challenging but we expect global growth to continue into 2011.

Slide 27 summarizes the status of our key planning assumptions and operational metrics for the first nine months and our 2010 and 2011 full-year outlook.

For the first nine months industry volume SAAR was 11.5 million units in the US and 15.2 million units in the 19 markets we track in Europe.

We expect full-year US industry volume now to be 11.6 million units and European industry volume to be about 15 million units.

On the Automotive operational metrics, all of our regions are on track to improve quality compared with a year ago based on the latest Global Quality Research System surveys.

In the first nine months Automotive structural costs were $700 million higher and, although not shown, commodity costs were $750 million higher compared with a year ago.

We expect full-year Automotive structural and commodity costs each to be about $1 billion higher compared with a year ago.

The higher Automotive structural costs support volume and growth of our product plans.

As a percent of revenue our cost structure continues to improve.

US total market share was 16.4% and US share of the retail market was 14.1% in the first nine months.

We are on track to gain full-year market share in the US for the second straight year, marking the first time since 1993 that we have achieved consecutive annual increases.

Europe market share for the first nine months was 8.6%, which is down compared with a year ago.

We now expect full-year European market share to be consistent with our year-to-date performance.

Automotive operating-related cash flow was $3.4 billion positive in the first nine months reflecting our improved profitability.

For the fourth quarter and full-year we expected to generate positive operating-related cash flow.

Capital expenditures were $2.8 billion in the first nine months.

We now expect full-year spending to be about $4 billion as we continue to realize the efficiencies from our global product development processes.

We remain on track with all of our product plans.

Overall, we are doing better than we expected through the first nine months of the year and we expect to continue to deliver solid results in the fourth quarter with each of our operations being profitable.

Even without the benefit of the conversion offers we discussed earlier, we now expect our Automotive cash to be about equal to our debt by year-end, earlier than previously expected.

For 2011 we expect to build upon our performance this year with continued improvement and Total Company profitability and Automotive operating-related cash flow.

In addition, we expect each of our operations to be profitable.

Slide 28 summarizes the key aspects of our plan, these remain unchanged.

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

Accelerate development of new products our customers want and value.

Finance our plan and improve our balance sheet.

And work together effectively as one team leveraging our global assets.

We continue to outperform the expectations we had earlier in the year delivering strong results and making significant progress towards strengthening our balance sheet despite still challenging business conditions.

We have aggressively restructured our business and are seeing the benefits of delivering a full family of vehicles with world-class quality, fuel-efficiency, safety, smart design, and value around the world.

In the coming months we will further strengthen our lineup with new vehicles such as the reinvented Ford Explorer and the all-new global Ford Focus and the all-new powertrain lineup for the F-150.

Overall, our performance so far this year reinforces the confidence we have in our plan allowing us to continue to leverage our global assets to take advantage of growth opportunities around the world, improve our productivity and achieve competitive costs while strengthening further our operational excellence, further strengthen our balance sheet, and work together as one global team to continue to deliver profitable growth for all.

And we would like to take your questions.

Thank you, Alan.

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

We have about 50 minutes for the question-and-answer 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 timeframe, please keep your questions brief.

Steve, can we have the first question please?

Brian Johnson, Barclays Capital.

A couple questions really around Europe and then a little bit around the US for Alan.

In Europe, for Lewis, why is it commodities are the same $100 million hit there as in North America despite a smaller production base?

And then, second, with production down 33,000 but sales down 53,000, where are you on inventories in Europe and how are you feeling going into the last quarter there?

Okay, we are just checking the first answer, although I think it's nothing sinister.

We feel pretty good about dealers stocks going into the fourth quarter.

In fact, I think we expect to see a modest stock increase in the fourth quarter.

Our stock levels are well under control in Europe.

It's rounding between the two commodity cost numbers.

I think the European number is under $100 but it rounds up, and the North American number is just slightly under $150 so it just rounds down.

So they are actually about -- between the two of them, it's about double in North America than Europe.

Okay.

And the second question is around -- I don't know if it's for Mark or Alan or Lewis -- the net pricing in North America.

If you were just trying to kind of separate that between what Ford has done over and above the industry and what the industry has done, how roughly would that split and then how do you see that going forward?

I am not sure we can split that just like that.

A lot of our pricing, as we have told you before, is our product pricing as we launch our new products.

We get better equipment levels on the vehicles.

The incentive spending is down a little bit and that may be competitively driven, but again we think it's -- we tend to think of it as just one -- our net transaction prices are continuing to improve.

The exact comparison with competitors I don't have in front of me, Brian.

Okay.

And then if there was an impact on average transaction price from Super Duty, am I correct in assuming that would be more in the mix than in the net pricing?

Yes.

Okay, thanks.

Himanshu Patel, JPMorgan.

Good morning, guys.

Main question is really on North America.

You have had three consecutive quarters of 9% to 11% margins, just kind of curious how you are thinking about the sustainability of these margins going forward.

As sort of the SAAR increases should we expect the benefits of operating leverage allowing you to kind of get your margins above that level or should we sort of view this as being the sustainable run rate with fixed costs coming back into the business?

Yes, we are going to see some structural cost increases as our volumes begin to increase as we have additional people working.

And we are also seeing some cost increases; we invest in additional new products and additional growth.

So I think I would think of this more as a sustainable level rather than looking for it to continue to improve.

Okay.

And then on your balance sheet comments, you mentioned zero net debt by year-end versus $2.6 billion I think at the end of Q3.

Just to be clear, that excludes the impact of the convert equitization but that does include the $600 million implied FMC distribution in Q4?

I am sorry.

Repeat the bit about the $600 million.

I think you said FMC dividends to the parent company were expected to be --.

Beg your pardon, I misheard.

It does include the Ford Credit dividend but it will be $1 billion, not $600 million.

We said they are going to remit $2.5 billion dollars and they have already remitted $1.5 billion third quarter year-to-date.

And the net cash excludes any impact of the conversion offer.

Okay, great.

And last question.

Lewis, any initial thoughts on just the pension situation in terms of 2011 cash contributions and expense?

Only really what we talked about last time I saw you at a bigger conference, that we expect the cash contribution to be about the same as this year and the expense to be up a little from this year but not material to the total company.

Great, thank you.

You're welcome.

Just one thing I failed to comment to Brian when he was asking me a couple of questions about Europe.

We do expect Ford of Europe to be profitable in the fourth quarter and profitable next year.

Joe Amaturo, Buckingham Research.

Good morning.

I was just wondering if you could give us an update on where the pension fund is tracking year-to-date.

No, we would rather wait till year-end to -- giving you mid-year or third-quarter projections is always a dangerous game so we will give you an update at year-end.

But we stick with expense up a little bit next year and cash contributions about the same as this year.

And have you thought about expected rates of return adjustments, given where interest rates are right now?

We are taking all that into consideration and we will give you an update at year-end, Joe.

Okay, thank you.

Thank you.

Chris Ceraso, Credit Suisse.

Thanks.

Good morning.

Maybe just a follow up, please, Lewis, on the pension.

You have told us that you think the expense will be up but not material.

What is the assumption about the change in the discount rate in that comment?

And then also, what period of years do you assume for the amortization of actuarial losses?

Chris, I think we will have a complete pension discussion at the end of the fourth quarter and I don't really want to piecemeal it together at the moment.

But we are assuming that discount rates will be down a bit.

Okay.

I have a question about North America.

Can you give us a little bit of detail behind the production number, the 590,000 units?

What is the split between cars and trucks?

How does that compare to the split in the third quarter?

And then, given that in total you are looking at roughly a flat build rate, should we expect roughly flat profitability for North America as we walk from Q3 to Q4?

Okay.

In terms of the split between cars and trucks, it's very slightly down on cars and up on trucks.

Really impacted by the fact that we are into the launch of the new Focus at year-end so we will have reduced production then.

I am sorry; I have forgotten the second part of your question.

Just on average, if you are looking at production that is roughly flat from Q3 to Q4, are there any major influences, whether it's cost or cost savings or spending on the launch of the new program, that would dictate materially higher or lower profits Q3 versus Q4?

Well, just as we have talked about at the end of the second quarter we do have a lot of launches going on so there will be some manufacturing launch expense, some advertising and sales promotion expense, and some engineering expense.

So we are expecting to have a good quarter but it is a lot of launch going on in the quarter.

Okay.

And then just one quick one on the off-lease vehicles.

You mentioned that it would be down ballpark 20% lower, is that in the neighborhood?

Hold on.

I will ask KR to have a think.

Chris, as far as vehicles that are coming off lease, we have [indications] of next year -- of this year roughly 400,000 vehicles terminating leasing and next year about 230,000 terminating their lease.

It's all because some of the gains we will get in we are not going to repeat next year.

Okay, thanks.

That is helpful.

And, Chris, just back to your fourth-quarter question.

You know what our seasonal expense pattern is; you see some seasonal expense in the fourth quarter but nothing unusual.

Okay.

Thanks, Lewis.

Adam Jonas, Morgan Stanley.

Good morning.

So just a bit on the products again.

Any update on how the Fiesta is doing in terms of content, average content per vehicle?

We have heard good things but just wanted to know if you had any more meat on the bone on detail there.

Also, on the finco, what is the ideal managed leverage ratio?

I am presuming it's not 6.3 times and obviously as you keep divvying cash out it will go up, but what would you think would be a reasonable rate, a reasonable level?

And then, if you are able to say, what is the all-in funding cost, roughly, of the Financial Services business right now, as in the legacy total portfolio now, so we can kind of compare your incremental borrowing to see what your yield pick-up will be?

Thanks.

Okay.

Why don't I try the first couple while KR thinks about your third question?

In terms of Fiesta, I have nothing new to update.

Very strong initial mix; strong mix of five-door, which is encouraging, and a strong mix of high series and high product content.

So good transaction prices; we are encouraged by that.

Sales are still ramping up as we increase availability around the regions and we are encouraged thus far.

In terms of managed leverage, we think 6.3 is a little low.

I think you know that we have been quite conservative about making sure we kept the credit company very liquid as there was trouble in the marketplace.

And I think you know we stand by it being our strategic asset that we want to say sure we keep in good times and bad.

With the present mix of lease and retail programs we think managed leverage should be more like maybe 10, maybe just a little north of 10.

It does change as you change the mix of lease and retail, but at the moment we think that is about where we would like to be.

Some way to go yet and we are in the -- memories are pretty short.

We are only just beginning to feel better about the credit markets and therefore begin to relax just a little bit.

And our present borrowing cost is about 4.5%.

Now that is current or is that what you are kind of -- is that what you would do today or is that the weighted average of the $70-some-odd-billion of debt?

Third-quarter weighted average.

Understood.

Thanks very much.

John Murphy, Bank of America Merrill Lynch.

Good morning, guys.

Just wanted to follow up on pricing, Alan.

Obviously you guys have had some good performance in the first three quarters this year.

I was just wondering where you think you are in this new pricing strategy and trying to really improve the brand image here and get the pricing up.

Are we at the second or third inning; are we halfway through the game?

I am just trying to understand what more is to come just as you think about pricing going forward.

Sure, John.

I think that we are seeing this pricing of the value across the entire product line.

The fact that we committed to make absolutely best-in-class vehicles, that every new one in terms of quality and fuel efficiency and safety and clearly the smart design features in the value, we are seeing the consumer really value the quality and all the features in our vehicles no matter what the size.

So remember we -- as you pointed out not too long ago, we were a discounted brand in the smaller and medium-sized vehicles.

Clearly, we didn't have the product line then to justify the value.

But, boy, I tell you, the response we are getting now, John, for the Fiesta, the Focus, the Fusion, the Taurus, the Mustang, the utilities, these vehicles are the new Ford.

They are world class and people really do want them and they really do value them.

So I think we are on a very positive, sustainable path on the value of the vehicles.

And then a second question; obviously the balance sheet is moving in the right direction.

Lewis, I was just wondering if you had any targets for debt levels.

I mean, net debt neutral at the end of this year is a pretty good position.

Is this the kind of thing that we should be looking for net cash positive of $10 billion before you start thinking about other sort of shareholder-friendly actions?

Or what is kind of the long-term target on debt in the balance sheet?

You would guess that we do have targets I have not shared externally.

But we have got some way to go before we are comfortable with the debt levels we have got and we are staying pretty focused on that.

I don't think we will ever tell you we are absolutely where we want to be because we are always going to try and improve.

Okay.

And then just lastly, you just did make one mention of in-sourcing some hourly jobs.

I am just wondering what parts of the car that was in.

And were you able to hire those workers in as Tier 2 UAW workers and how far you can go with that in-sourcing and hiring, hopefully of Tier 2 workers?

No, they are not Tier 2 workers.

We still have some existing employees to fully utilize, particularly as we bring in Ford employees that were being utilized in ACH and Visteon.

They are all profitable actions otherwise we wouldn't do them and they reflect the competitive operating agreements we have got in plants.

I think there is about like 33 parts or something and they are scattered all around the car.

But I don't -- I am sorry to say I don't remember what they were.

Sorry 33 plants, not 33 parts.

I don't know which parts they are.

Okay, great.

Thank you very much.

We have continued to look at where we see opportunities to improve our cost base and where we do we take them.

Great.

Thank you very much, guys.

Rod Lache, Deutsche Bank.

Good morning, everybody.

Just a couple more questions on the margin outlook for North America.

Noticed that your North American structural costs, excluding pension, may be going up by something like $200 million this quarter.

Is there a rule of thumb that you can provide us on how fixed costs move up with volume?

Is there still room for productivity gains, maybe with your skilled labor force there on the fixed costs?

Can you also on the cost side comment on your outlook for commodities?

And then lastly on the margins, you commented that a lot of your positive pricing is driven by the new product launches.

You do have a pretty active new product cadence, at least through 2011, maybe even into 2012.

It looks like it could even be better than 2010.

Do you see that as having the potential to add to pricing or is there any reason to expect deterioration?

Okay.

On the first question I think within our structural costs there are a couple of elements.

One is as our volumes go up we utilize more people.

But at the same time we have a very aggressive -- not the right choice of words, but a very strong efficiency program operating in all the plants, and you can see that in some of the studies that get published, where we are always looking to improve efficiency.

So assuming that as volumes go up that we don't find offsets for them, it wouldn't be a good rule of thumb.

Secondarily, our structural costs that I think of is some of the investment for the future -- product development, advertising and sales promotion -- where they are not necessarily near term linked directly to volume there to make sure we continue with our very competitive product portfolio.

In terms of where we are going on pricing, I would think of it -- and I am sorry I have missed commodities.

I will come back to commodities.

I would think of pricing as a -- if you think of it as a rolling ball, the first big step we have made in the last two or three years as we have moved from, particularly on the car side, somewhat less than fully competitive products to really world-class competitive products, you have seen a really big chunk of positive net pricing as we have moved our transaction prices towards our Asian competitors.

Then over the longer term the challenge is to make sure that we keep our product portfolio right at the front of the most fresh because that will continue to help us keep our transaction price, once we have completely closed the gap, fully competitive.

And I think that is why you will see, for example, product engineering hop up a little bit because we are determined, as some of your studies have shown, that we are determined to have the freshest product portfolio in the competitive set.

On commodity costs we saw a dip last, earlier this year and they are coming back up again.

And we expect them to continue, long-term, to be going up as industrial activity continues going on in the world.

The last area that I didn't talk about was material costs.

There are two elements of material costs going on when you look at our margins; one is as we aim for world-class products it does involve some additional product content.

Actually, Alan talks about cars that customers want and vehicles that customers want and value.

Our customers are demonstrating, and Fiesta is a great example, are demonstrating that they are looking for fully-contented products and are prepared to pay for them.

And then the second area is we have very ambitious plans working with our supplier partners on continuing to be more efficient in our use of component costs.

We are seeing the benefits, I think, of working around the world on One Ford.

We are in the middle of it on Fiesta.

We are just about to go to the next really big step with Focus and that is a very encouraging sign.

Again, just a reminder of that Fiesta, because we started a little bit late in the process, has 65% part commonality by value around the world.

But Focus, when we get there, will be 80% part commonality around the world.

It's all driven by -- the remaining lack of commonality is driven by what the customers want rather than what -- the way we used to do was what we wanted to change.

The better example I think of is four-door cars are incredibly important in Asia Pacific, very, very important in Russia, and very, very important in the US; much less important in Europe.

So you can see four-door cars are going to be a much more important part of the Focus range than perhaps when it was just a European-dominated product.

And you know, the material costs are going to benefit from -- and on Focus as an example, about 2 million units with the 10 top outs.

Lewis, can you give us some bookends maybe around the structural costs outlook just taking into account what you see in terms of volume, the product spend, and the efficiency?

Just some sense of what happens as the volumes continue to recover?

I would but I can't read my colleagues writing at the moment.

I will give you a clue in a moment.

I don't want to give you too much.

I think they are going to be declining as a percent of revenue a little bit as volume goes up, but I don't want to give you too much detail.

Well, do just -- if that is correct, why wouldn't there be additional potential for margin in the North American business?

Just as that you have got a cyclical recovery still ahead of you.

Well, we are not going to get too ambitious about it.

I think we are at a really good position on our margins in the North American market at the moment, so I would rather be -- not promise, over-promise on that the moment.

Great.

Well, thank you for that.

I promise you we will continue to look for the opportunities where they exist.

We are not held back by lack of ambition but we are held back a little bit about willing to project it going forward too much, because we are also working really hard to keep -- to stay competitive in our cost base.

Because at the end of the day I think we have all learned over the last several years you have got to stay really competitive at the cost base.

And also recognize that we are going through this very slow economic recovery and we want to make sure that we stay really focused on keeping our cost base under control.

Great.

Just a last one.

What is your normalized tax rate?

You mentioned that, on the P&L at least, it's going to change maybe around one.

We are projecting about 35%.

Thank you.

It could be plus or minus, but about 35%.

You are welcome.

Patrick Archambault, Goldman Sachs.

Good morning.

Just wanted to dig in a little bit into Europe.

Can you maybe walk us to how you get from the loss you did this quarter to profitability in fourth quarter then 2011?

I mean there is clearly some seasonality there that helps you and then it does look like you might have had some launch issues that might have been one time as well.

But kind of just more broadly, you have described the environment as very competitive and clearly you have lost a bit of share probably to the likes of Volkswagen and others.

What on the margin is sort of getting you to those improvements?

You are right, there is some quite significant seasonality in the third-quarter number which you know third quarter in Europe is -- customers are on vacation which does tend to slow the absolute sales.

And our plants are on vacation so we have shut downs and you see our lower wholesales -- lower production, lower wholesales, and dealer stocks tend to run down in the third quarter.

In the fourth quarter we will have some dealer stock recovery for the strong selling period in the first quarter.

I think encouragingly for us in the third over second analysis we saw most of the explanation was around volume and mix, and a lot of that was just straight volume.

As we turn into the fourth quarter I am expecting to see some mix improvements for a couple of reasons.

One is as the scrappage programs have rolled off we have started seeing a modest, very modest improvement in mix from small cars, B and sub B cars up to C and C/D cars.

It's going to play to our product launch cadence.

Just as last year played to our product launch cadence on small cars, I think the fourth quarter next year is going to play to our product launch cadence on the brand-new C-MAX.

Replacement for the five-seat C-MAX, brand-new segment entry for us with the seven-seat C-MAX in the fourth-quarter.

Major change to Mondeo and if you haven't seen it, it's a knockout car.

S-MAX and Galaxy have had a really good reception.

We launched in the second quarter.

Then when we get to next year we are going to have the brand-new Focus, which is a car that we are really looking forward to around the world but particularly in Europe and North America.

And then lastly, the other thing that gives me a little bit of encouragement is in the third over second analysis we actually had a little bit of positive net pricing primarily driven by reduced incentives, which says to me that the teams working in Europe of holding the line on not doing this really crazy stuff at month end, which is really hard to resist because you don't want to see your share going down.

But we have said, just as we have said in North America, this is not a market share gain per se.

It's profitable growth that we are looking for and that is what we are really encouraging the team to do.

And I think second quarter -- the third-quarter positive net pricing is encouraging and that is before we see the new products that we think have pricing opportunity as well.

So I think -- obviously, the team recognizes it.

We have set them the objective but they are up for it.

We all collectively believe that we will be profitable in the fourth quarter and profitable next year as we will for all business units.

This is not just a European story.

We are expecting all business units to be profitable in the fourth quarter and profitable for the full-year.

Okay, very helpful.

One last one on Ford Credit.

Just based on your comments it clearly sounds like you guys are over-capitalized there.

When are you going to update us on kind of exactly the dividends that you plan to pay out to the Motor Company for 2011?

We will do that when we give you the fourth-quarter results at the end of the year.

We are just focused in terms of that, on the $1 billion of dividends that they are going to provide this year which will obviously help towards our net cash neutral objective by year-end, which is, as you know, quite a lot earlier than we have guided as recently as the end of the second quarter.

Great.

Okay, that is all I had.

Thank you.

Thanks a lot, Patrick.

(Operator Instructions) Colin Langan, UBS.

Good morning.

Can you comment on competitor pricing in the industry?

Is there any concern that things are going to get tougher into next year?

Obviously there have been some incentives in Europe.

And how, if we had a similar situation in the US, would you respond?

Would you be willing to walk away from share if incentives do creep up next year or do you not see that as a risk?

Well, let's separate out Europe and North America.

The environment I think in North America is a bit different to Europe because there were such significant structural changes in the industry in the last 18 months or two years.

Clearly, all our competitors have objectives to make money which is a good thing.

Clearly, some of our competitors don't have the tailwinds of foreign currency benefits that they once had so I think that puts a bit of pressure on people not doing crazy things.

Our domestic competitors have some major capital actions ahead of them which will, I think, keep their mind focused on being profitable.

So I think the environment in the US in particular is encouraging because everybody has a need to make money.

In Europe it's a little different and a little more of concern to us.

Clearly, everybody has the need to make money but that is not reflected in some behavior in Europe where some of our competitors are doing very, we would think, unbusiness-like things at the end of each month by putting huge numbers of vehicles in as dealer demos or company-owned cars.

Really just building used cars which we don't think is a good thing to do.

That can't be sustainable forever, because -- all the European businesses need to make money, even in Europe, and I think for many of them as they announce their results their lack of profitability in Europe is perhaps more disguised than ours is because we separate out Europe as a regional unit rather than reporting on a worldwide brand.

So we think things will have to change in Europe over time.

We don't think national governments are going to be able to afford to give overt or covert support to national champions in the way they have done in the past, so we expect over time things to improve in Europe.

Meanwhile for us, we have set our stool out to do just what we did in North America -- drive the business by great products, continue to build a brand around Europe, and restrain ourselves from margin-decreasing activities.

Okay.

One other question.

Today you made some pretty big announcements that affects the balance sheet.

Do you have any -- in the near term are there any additional steps that you might consider taking to improve the balance sheet further?

And do you have any sort of update on the timeline that you maybe would target to get to investment grade?

Colin, give me a break.

We are only just drawing (multiple speakers).

I think if we get what we are trying to do done in the fourth quarter we will be very pleased, not satisfied.

As you know, Neil and his team know our expectations of continuing to improve our balance sheet.

In terms of the timing of investment grade, I think perhaps I oversold that as a key metric.

I think the key metric it's a great communication tool inside the Company, but of course in the rating agencies will decide when they believe we have got to investment grade.

What we are driving our business on is we want to have a fundamentally healthier balance sheet.

I think as we achieve that I think the markets will reward us with continuing tightening of spreads.

They have already tightened pretty significantly, maybe a little bit ahead of where the rating agencies would judge us at the moment, and we will continue to do that.

But our focus is on we need a much, much healthier balance sheet.

I think the GM IPO has probably brought that to people's attention a little bit, but we were already, as you know, focused on it.

We have been focused since the very beginning when we said as business improved we would be taking capital actions.

With the -- I think as Alan said, with the VEBA note pay down at the end this week we will have reduced debt by $10.8 billion, which is just a -- and reduce our ongoing interest expense by $800 million.

That is such a dramatic improvement to the structural health of the business.

I promise you, we will continue to stay very focused on it.

But just give us -- we have got 20 today, 20 business days to go on the conversion offer so we are going to stay focused on that.

Then we will draw a breath and see what is next.

Just one quick follow on.

I think earlier you mentioned the average cost of borrowing for Ford Credit was 4.5%.

Any estimate of what it would be if you were actually investment grade in that business?

Yes, probably lower but I am not sure how much lower.

We are a bit focused on getting there first.

Of course we are in this extraordinary period of very, very, very low base rates.

Okay.

Steve, can we have the next question please?

Keith Knaughton, Bloomberg News.

A couple of questions.

One is do you plan to reduce your investment in Mazda and also reduce the platform sharing that you have done in the past?

We have nothing to report on our relationship with Mazda at this time, Keith.

If and when we do, we would let everybody know.

And on our working together with Mazda, it has been a very good mutually beneficial relationship.

You see us expanding that relationship in our Thailand plant as we mentioned, and we have a really good technology and manufacturing technology exchange.

So it's a very valuable relationship which we look forward to continuing going forward.

And then secondly, I wonder on the GM IPO, as investors have a second domestic automaker that they can invest in if you imagine that will have some impact on your share performance as investors, for instance, balance their holdings.

I think the most important thing that we do, Keith, as we have talked about, is to continue to profitably grow the Ford Motor Company because clearly that is what investors are looking for and that is the path we are on.

So that is absolutely our focus going forward.

Thanks very much.

You bet.

Brent Snavely, Detroit Free Press.

Hello, guys.

Just thought I would touch on the VEBA and being able to pay off all remaining obligations owed there.

Is that -- did you ever think you would be able to get that paid off this quickly?

And how much of a -- how do you view that deal at this point now that you are able to extinguish those obligations?

Oh, absolutely.

I think that we are clearly ahead of where we thought we could be on improving our balance sheet and repaying our loans.

And it's a very positive development because this is the last commitment that we have for the VEBA trust.

Also, it's great to honor all of our retirees by being able to fully fund our commitment and to do it earlier rather than later.

This action, plus the fact that we are going to do that this week, it will result in us reducing our debt by $10.8 billion this year, Brent, which allows us to reduce our annualized interest payments by over $800 million.

So it's just a very positive thing for everybody.

We are glad that we could do it sooner rather than later based on the strength of us profitably growing the Company.

Okay, thank you.

You are welcome.

Chris Woodyard, USA Today.

Good morning.

Lewis talked about the C-MAX in Europe.

I wondered, there has been some thoughts that you might try to bring it to the US.

I wonder if you could comment on that, Alan, and whether you see any product gaps that you would like to fill in the US.

Yes, we have already said that we are going to bring the seven-seat C-MAX to North America and looking forward to that.

We had some of our media colleagues drive the vehicle in the South of France two or three weeks ago and got some, I think, very positive feedback from that.

So that helped us out.

I will let Alan answer the product gaps.

You know, if we had a big gaping one we probably wouldn't tell you.

You know that it really is an important question because four years ago, when we pulled together around this compelling vision and new strategy for Ford, the key decision that we took was one to focus on the Ford brand and, of course, Lincoln on the luxury side.

The second commitment was to have a full family of vehicles -- small, medium, and large, cars, utilities, and trucks.

And, of course, the next commitment was every new vehicle would be the very best-in-class in terms of quality, fuel efficiency, safety, really smart design, like SYNC and MyFord, and, of course, the best value.

Then to use our global assets and intellectual capital around the world to leverage our scale.

And so when you look at the product line now just fundamentally and you start with the Ka outside of the US and of course the Fiesta, the Focus, the Fusion, and the Taurus, of course, the Mustang; then the Escape, the Edge, and the Flex; then of course the Ranger around the world, the new Explorer, the Expedition, the F-Series, the E-Series and of course the Transit family, we are now -- the consumers, I believe, are really well positioned in every market segment.

But another neat thing about the strategy is that, for example on the Focus, the new Focus is coming.

We are going to be making over 2 million units off that fundamental new platform with 10 different top hats and it's going to be produced in five different locations around the world.

So we have the flexibility of those 10 different variations from four-door to five-door to wagons to utilities.

We have the ability to move with the market and deliver to the customers what they really do want and value.

So in every market segment we have there is so much more flexibility and variation that the customers want plus the ability to move quickly to support them.

So we have got a few neat things that we are working on that we will share going forward, but fundamentally I think that we are really on our way with that full family of best-in-class vehicles being available to all of the markets around the world.

Thank you.

John McElroy, Autoline Detroit.

Good morning.

John, welcome.

How are you?

I am doing great, thanks.

I was surprised to see the Volvo numbers included in your financial results.

I thought that it had been sold off and would be out of there.

So my question is when does Volvo come off the books?

And if it were in the third quarter, your vehicle sales would be up a lot, you would be positive in your revenue for the -- or you were positive in revenue but it would have gone up.

So the question is when does Volvo come off the books and how does that impact your earnings going forward?

Well, explicitly Volvo is off the books as of August 2 this year.

We still have some final true-ups on the price adjustments to make, John, and we will be making those during this fourth quarter.

The reason you still see it in some of the comparisons, for 2010 we have treated Volvo throughout the first and second quarter and in the third quarter because we had a month and a couple of days of them in the third quarter as a special.

So 2010 operating results are clean, they exclude Volvo.

For 2009, results as filed include Volvo and that is why Alan described the wholesales and the revenue including and excluding Volvo, because they are in the 2009 numbers.

But let me be a little bit more explicit.

So excluding Volvo our sales at 1.253 million units would have been 91,000 units higher than last year and that is about 8%.

And our revenue at $29 billion would have been $1.7 billion higher than last year and that is about 6%.

So it's really just because they are in the prior-year results and as we are comparing with prior-year results we are trying to show, make sure people understand the difference.

You will see on some of the charts where the non-repeated Volvo losses in the third quarter last year, for example, is one of the reasons our profits are up year-over-year.

Thank you.

Does that help?

Does that help?

Yes, it does.

Okay, thanks a lot.

(Operator Instructions) Matthias Ruch, Financial Times Germany.

Good morning.

I have a question concerning your truck business.

I read that the pickup market is growing faster than the market at all.

Is that true and what role does the F-150 play for you in this third quarter and this year?

The full-size pickup segmentation is up a little bit.

This year about a percentage point I think from memory.

So we have got a little bit of variable product line mix in our numbers but we are actually seeing strength across the board.

And is the pickup segment still the one where you have the highest margins?

Yes, it's one of the highest revenue segments and we also have good margins on it.

All right, thanks.

Alisa Priddle, Detroit News.

Hello.

I am just wondering with your aggressive debt reduction how do you now feel that you compare with GM and Chrysler, which obviously shed their debt in a different manner through bankruptcy?

Well, you know, our plan always was to borrow the money that we needed to restructure the business to get back to profitability and also to accelerate the development of the new products.

We are really, really pleased with the Ford plan and we are very pleased for all the stakeholders that we are now accelerating the repayment of that debt and improving our balance sheet which will even further improve our competitiveness.

So clearly we really like the Ford plan.

But do you sort of have a sense as to how close you are coming to leveling the field?

Well, I think the data on the balance sheet is all public knowledge.

Clearly, we are making a tremendous progress and we are much further ahead than we even thought we could be because of the performance we have on profitably growing the Company.

But we are on a really good path.

Thanks.

You are welcome.

Steve, I think we have time just for maybe one more question please.

(Operator Instructions) Brent Snavely, Detroit Free Press.

Hi, Alan.

Just thought I would ask about overall North American employment in light of the announcement yesterday to invest more in Michigan.

What is your outlook there and at what point do you think you will start hiring Tier 2 workers at the lower wage?

We don't have a time frame for that question because clearly it will be dependent on the strengthening economy in the US as well as worldwide.

But the actions we announced yesterday are clearly a very positive thing for all of us associated with Ford here in Michigan and the United States.

Because in addition to our recent announcement of further investment in Chicago with the new Explorer and of course the announcement yesterday that we are going to invest another $850 million in all of our facilities here in Michigan and the fact that the continuing work that we are doing with everybody associated with Ford on our competitiveness, we are actually in-sourcing another 2,000 jobs, so the timeline of that will be determined by the fundamental gradual recovery and getting our employees back and working and continuously improving our competitiveness.

So we are on a good path and it's going to provide a lot of opportunities and great careers for a lot of people, Brent.

What is your timeframe for additional product announcements at places like Claycomo and Louisville Assembly, etc.?

We don't have anything to announce new today but we will -- as soon as we are ready we will announce it.

Thank you very much.

You are welcome.

Okay.

Thank you, everyone.

That concludes today's presentation.

We thank all of you for joining us here today.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Good day.