福特汽車 (F) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ford Motor Company first-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 facilitate a question-and-answer session.

(Operator Instructions).

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

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

K.R.

Kent, Director of Investor Relations.

Please proceed, sir.

Thank you, Tawanda.

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; David Brandi, Assistant Treasurer; Paul Andonian, Director of Accounting; and Mike Seneski, the Ford Credit CFO.

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

Copies of this morning's press release and the presentation slides that 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 in 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 the presentation.

These risk factors and other key information are detailed in your 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.

Allen Mulally.

Thank you, K.R.

Good morning to everyone.

We are pleased to have the opportunity to provide you with a review of our first-quarter business performance and the progress we continue to make in delivering our plan.

Let's start by turning to slide three.

Overall our team delivered a great quarter of growth, profitability, and positive Automotive operating-related cash flow.

Both volume and revenue were higher than a year ago, we earned a pre-tax operating profit for the seventh consecutive quarter and the results were over 40% better than a year ago.

In addition, each of our Automotive operations was profitable with results that were better than the first quarter of 2010.

Financial Services also was solidly profitable.

We further strengthened our balance sheet by reducing debt during the quarter.

At the same time, we increased our overall liquidity and made further progress towards achieving investment grade.

We also launched more great products our customers want and value, notably the all-new fuel-efficient Focus in North America and in Europe.

The impact of the tragic events in Japan continues to unfold and we are managing this on a day-by-day basis.

Our first-quarter performance is a step forward in our delivery of profitable growth for all not only in 2011 but for the years ahead.

We are investing for future growth and our focused on developing outstanding products with segment-leading quality, safety, fuel economy, and technology.

We are adding capacity in emerging economies to increase dramatically our participation, while investing to build the strength of our brand around the world.

While these actions and investments are increasing costs in line with our plan, they are also driving higher volumes, richer mix, and stronger transaction prices.

Slide four summarizes our first-quarter business results compared with the year ago.

Vehicle wholesales were 1.4 million units, up 150,000 units or 12% from 2010.

Revenue was $33.1 billion, an increase of $5 billion or 18% from 2010.

For comparison purposes, we excluded Volvo wholesales and revenue from 2010.

Pretax operating profit excluding special items was $2.8 billion or $0.62 per share an $827 million increase from a year ago.

Net income attributable to Ford including unfavorable pre-tax special items of $61 million was $2.6 billion or $0.61 per share, a $466 million increase from a year ago.

We ended the quarter with $21.3 billion of Automotive gross cash and with Automotive gross cash exceeding debt by $4.7 billion, an improvement of $13.7 billion compared with a year ago.

Slide five reviews our business and sales highlights.

We continued to progress our key priority of improving our Automotive balance sheet by fully redeeming our Trust Preferred securities for a gross debt reduction of $3 billion.

In addition, we improved our liquidity by $2.8 billion including a $1.7 billion increase in our secured revolving credit facility.

Continued to invest in future growth, we announced a planned joint venture in Russia with Sollers to expand production and distribution of Ford vehicles in what we expect to be the largest market in Europe by around 2015.

In dealer showrooms around the world, customers continue to respond to ongoing improvements across our entire product line.

In the US, our commitment to a brand promise of balanced lineup of a complete family of best in class small, medium, and large, vehicles resulted in a 16% increase in retail sales.

Meanwhile, we remained the market leader in Canada with a continued improvement in market share.

Our focus on Asia Pacific and Africa continues to pay off with a nearly 0.5 point market share gain and continued sales growth in China and in India.

Slide six details our key product highlights where we continue to deliver on the four pillars of our product strategy, quality, green, safe, and smart.

Lincoln was awarded the top spot in the J.D.

Power & Associates annual US Vehicle Dependability survey.

In Geneva, we introduced the innovative Ford B-MAX, an all-new vehicle providing innovation and utility by offering dual sliding doors without the presence of a B pillar between the front and the back rows.

We also announced the expansion of Sync with my MyFord Touch technology to the European markets by 2012.

In addition, we launched EcoBoost engine technology in China, with the production of the 2011 Ford Mondeo at our joint venture plant in Chongqing.

Fiesta, now sold around the world, became the first vehicle in its segment to earn top safety ratings in each of the world's largest markets.

And finally, we introduced a new Cargo truck in Brazil which will compete in a critical segment of the market.

Now I would like to turn it over to Lewis, who will provide even more details on our first-quarter financial results.

Thanks, Alan.

Let's start with slide eight, which summarizes our financial results compared with the year-ago.

Pre-tax operating profit of $2.8 billion was $827 million better than a year ago.

Net income attributable to Ford at $2.6 billion was $466 million higher than a year ago.

The lower improvement in net income relative to pretax operating profit is due primarily to the non repeat of the favorable impact a year ago of results at Volvo, which was then in held for sale status and details are provided in Appendix 3.

This year we also incurred a higher provision from income taxes.

Slide nine summarizes our pre-tax operating results by sector.

The total Company first-quarter pre-tax operating profit of $2.8 billion reflects a profit of $2.1 billion for the Automotive sector and $706 million for Financial Services sector.

As shown in the memo, Total Company pre-tax operating profit increased by $827 million compared with a year ago.

This increase is more than explained by higher Automotive profits as we expected profit at Financial Services decline compared to 2010.

Compared to the fourth quarter 2010, Total Company pre-tax operating profit improved $1.5 billion, driven primarily by stronger Automotive results.

Slide 10 highlights the key market factors and financial metrics for our Total Automotive business.

The metrics shown on the slide improved from a year ago including Automotive operating margin which we define as Automotive pre-tax operating results excluding Other Automotive divided by Automotive revenue.

Operating margin was 7.7%, 1.5 points better than the year ago.

This reflects improvements at each of our operations with the exception of South America.

Slide 11 shows pre-tax operating results for each of our Automotive segments as well as Other Automotive.

Total Automotive pre-tax operating profit was $2.1 billion with all of our Automotive operating segments profitable led by our North American operation and with solid improvements in Europe.

For the first quarter, Other Automotive loss of $249 million is primarily explained by net interest expense of $185 million comprised of $251 million of interest expense offset partially by interest income.

The balance of Other Automotive reflects unfavorable fair market value adjustments related primarily to our investment in Mazda.

As shown in the memo, results of each of our Automotive operations improved compared with the first quarter of 2010.

And each operation with the exception of South America also improved versus fourth quarter 2010.

Slide 12 summarizes the change in Automotive pre-tax operating compared with 2010 by causal factor.

Overall, pre-tax profit improved by $900 million.

Our Automotive business is benefiting from growth in both volume and per unit net revenue.

This revenue growth along with scale benefits from increasing volume are driving improvements in profitability and operating margin despite higher commodity costs and planned cost increases associated with the investments we are making in our products, brand, and future growth.

The profitability improvement also reflects our stronger balance sheet through lower net interest expense.

As shown here, volume and mix was $1 billion favorable, reflecting primarily higher industry volume.

The strength of our products including the content and features that our customers want and value is driving favorable mix improvements in the quarter, along with a $900 million improvement in net pricing.

Contribution costs which include material costs, warranty expense, and freight and duty costs were higher in part due to commodity costs.

Material Excluding Commodities reflect added content, technology and features for our new products, offset partially by material cost reductions from our suppliers.

Other costs increased by $300 million more than explained by higher structural costs.

This reflects the impact of new product launches, investments in future growth, and higher volumes.

Slide 13 summarizes the change in fourth-quarter Automotive pre-tax operating profit compared with the fourth quarter of 2010 by causal factor.

Overall first-quarter pre-tax profit improved by $1.4 billion.

This is largely explained by an improvement in Other costs, essentially our structural costs, reflecting reversal of the seasonal cost increases that impacted the fourth quarter of 2010.

Fourth-quarter costs are typically the highest of the year.

In addition to this seasonal factor, the first-quarter sequential profit improvement reflects favorable volume and mix and favorable net pricing.

Turning to our Automotive business in North America, slide 14 highlights the key market factors and financial metrics.

The metrics shown for North America improved compared with a year ago.

Pre-tax operating profit at $1.8 billion improved about $600 million, and operating margin at 10.3% was up 1.4 percentage points.

The US industry sales were higher but Ford's US total market share declined 0.5 percentage point compared with the same period last year.

Slide 15 shows the change in first quarter North American pre-tax operating results compared with 2010 by causal factor.

Overall, first-quarter results improved by $600 million.

Volume and mix is $900 million favorable, primarily explained by higher industry volume and favorable mix.

Dealer stocks detailed in Appendix 6 increased during the first quarter in line with higher sales volumes.

The increase however was less than the increase in the first quarter of 2010.

Net pricing was $700 million favorable, reflecting the strength of our brand, our outstanding products, our disciplined approach to incentive spending, and our ongoing practice of matching production to customer demand.

Contribution costs increased by $700 million, reflecting Material Excluding Commodities, mainly new product costs, as well as increases for commodities, warranty, and freight and duty.

Other costs increased by $200 million, more than explained by higher structural costs to support higher volumes and new product launches.

As shown in the memo, pre-tax operating results improved by $1.2 billion compared with the fourth quarter of 2010, more than explained by lower costs and favorable market factors.

Slide 16 shows our first-quarter US market share.

US total market share in the first quarter of 16% declined compared to the same period last year.

This was primarily due to our retail share.

Our retail share was lower because we chose to maintain our disciplined approach to incentive spending in the face of substantial increases from some competitors particularly in January and February.

In March, our retail share of the retail industry improved approximately 1 percentage point from January and February.

The spending by some of our competitors was more restrained.

Turning now to South America on slide 17, results from South America continued to be strong.

First-quarter wholesale volume and revenue both improved from a year ago.

Pre-tax operating profit of $210 million increased slightly and operating margin at 9.1% declined 1.1 percentage points, reflecting primarily the Venezuelan devaluation and cost increases that could not be fully recovered through pricing.

Industry SAAR at 5.3 million units increased from a year ago.

Our market share at 9.5% declined due primarily to lower share in Brazil.

This reflected primarily the non-repeat of our strong performance last year when we were well-positioned to take advantage of temporary customer tax incentives offered by the government to stimulate industry sales.

Slide 18 shows the change in first quarter South America pre-tax operating results compared with 2010 by causal factor.

Overall, first-quarter results improved by $7 million.

Market factors including net pricing were favorable, were offset largely by higher costs from unfavorable exchange.

As shown in the memo, pre-tax operating results declined by $71 million compared with the fourth quarter 2010, more than explained by normal industry volume seasonality.

Slide 19 covers Ford of Europe.

Our first-quarter results were strong and our key metrics shown on the slide were favorable despite a challenging external environment.

Wholesale volume and revenue improved and pre-tax operating profit for $293 million increased by $186 million.

Operating margin at 3.4% increased by 2 percentage points.

Industry SAAR for the 19 markets that we track was marginally lower than the year ago at 15.9 million units.

First-quarter market share at 8.5% was down 0.9 percentage point, reflecting the absence in this year of the favorable impact the scrappage programs had on our share in 2010 as well as our decision to selectively reduce participation in low margin business.

Our share improved by 0.9 percentage point compared with the fourth quarter.

Slide 20 shows the change in first-quarter Europe pre-tax operating results compared with 2010 by causal factor.

Overall first-quarter results improved $186 million.

The higher profit is more than explained by higher net pricing, favorable volume and mix, favorable exchange, and Other, mainly higher subsidiary profits.

Dealer stocks increased in the quarter to align stocks with expected demand.

This compares with a stock reduction in the same period last year with scrappage programs ended.

And as shown in the memo, Europe's pre-tax profit improved $344 million compared to the fourth quarter 2010.

This is explained primarily by favorable volume and mix and lower costs, factors driven by the normal seasonality of our business in Europe.

Slide 21 summarizes the key metrics of Asia-Pacific and Africa.

Overall business results improved compared with a year ago.

Wholesale volume and revenue increased by 28% and 31% respectively.

Our pre-tax operating profit at $33 million was up $10 million.

Operating margin was at 1.6%.

Industry sales in the region continued to grow strongly with the industry SAAR at 33 million units, up 3.6 million units.

Our market share at 2.4% was up 0.4 percentage point, reflecting primarily the success of Figo in India and Fiesta in the ASEAN markets.

Slide 22 shows the change in first quarter Asia-Pacific Africa pre-tax operating results compared with a year ago.

Overall first-quarter results improved by $10 million.

As shown in the memo, Asia Pacific and Africa's results also improved by $10 million compared with the fourth quarter of 2010.

Turning now to slide 23 and review of Automotive gross cash and operating related cash flow, we ended the quarter with $21.3 billion in Automotive gross cash, an increase of $800 million from the end of 2010.

This reflected positive Automotive operating-related cash flow of $2.2 billion mainly the flow-through of first-quarter pre-tax operating profits of $2.1 billion.

In addition, we had positive receipts of $1.3 billion from our Financial Services Sector including $900 million of Ford Credit distributions.

Our cash flow before changes in debt and pension contribution was $3.6 billion.

Net debt declined by $2.5 billion in the quarter and we also made payments of $300 million to non-funded -- to non-US-funded pension plans.

Slide 24 summarizes our Automotive sector cash and debt position at the end of the first quarter.

Automotive debt was $16.6 billion, which is a reduction of $2.5 billion from year-end 2010.

This includes the full redemption of our Trust Preferred securities, offset partially by an increase in low-cost loans to support advanced technology.

And our net cash as of March 31 was $4.7 billion.

Automotive liquidity increased by $2.8 billion to $30.7 billion, including a $1.7 billion increase in our secured revolving credit facility.

Slide 25 shows the change in first-quarter Ford Credit pre-tax results compared with a year ago.

Overall first-quarter results decreased $115 million.

This decrease is more than explained by lower market valuation adjustments to derivatives included in Other and lower volume.

And as shown in the memo, Ford Credit's results increased $141 million compared with the fourth quarter of 2010.

This was primarily explained by lower provision for credit losses and included in Other, lower net losses related to debt repurchases and lower operating costs.

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

We estimate the profit impact of these two items to reduce profit by about $1.1 billion in 2011 compared with 2010.

Slide 26 covers Ford Credit's liquidity and funding.

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

Ford Credit's liquidity exceeded utilization by about $19 billion and as shown in the right box, Ford Credit is on track to achieve its full year funding plan.

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

Our funding strategy remains focused on access to a variety of markets, channels, and investors.

Our liquidity remains 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 first quarter, Ford Credit's managed leverage was 7 to 1 and equity was at $10.2 billion.

Ford Credit now expects full-year distribution of about $3 billion to its parents.

Now I would like to turn it back to Alan to discuss our 2011 Outlook and the Plan going forward.

Thank you, Lewis.

Slide 28 provides an overview of the business environment.

For 2011, we expect global economic growth in the 3% to 3.5% range, providing a positive environment for further recovery in the global automotive industry.

Rising oil and commodity prices however represent challenges for growth although they have had a relatively small impact on the pace of economic activity so far.

Higher fuel prices however particularly in the US have contributed to a marked shift in industry segmentation towards smaller cars.

Our strong lineup of fuel-efficient vehicles including small cars, specifically Fiesta and just-introduced Focus have us well-positioned for this new market dynamic.

The events in Japan are estimated to slow industrial output in the near term.

We expect this will reduce industry volumes in 2011, with a full recovery expected in 2012.

Overall, despite these challenges, we assess the global business environment for automotive industry growth still to be positive for 2011.

On slide 29 is an update of the impact of the events in Japan on our business.

Although we have no production facilities in Japan, we do have personnel, including dealerships, and are pleased to report that none of them have been harmed.

We also have suppliers located in Japan, with whom we have been working closely to assess their production and shipping capabilities and to minimize supply disruptions.

During the first quarter, there was very limited impact on our production.

As we look forward, we expect our Asia-Pacific Africa operations to be affected to some degree by a shortage of components in the near term.

However, the impact on our overall results will not be material.

Should the supply of key material or components from Japan be disrupted and an alternate supply not be available, we may have to reduce our temporary production of vehicles in other regions.

Slide 30 covers first-quarter actual production and our plans for the second quarter.

Our first-quarter 2011 total Company production was 1.5 million units, up 149,000 units from a year ago and consistent with our most recent guidance.

We expect total Company second-quarter production to be 1.5 million units, up 12,000 units from a year ago, reflecting continued strong customer demand for our products.

This forecast reflects our best projection at this time of the impact of the events in Japan.

Should our outlook change materially, we will update our forecast accordingly.

As always, our production plans remain consistent with our strategy to match supply to demand.

Slide 31 summarizes our first-quarter status and our planning assumptions and key operational metrics in 2011.

Despite encouraging first-quarter industry levels, we are maintaining our present guidance for North America and Europe.

There is significant uncertainty related to recent global events that could have an impact on industry volumes in the coming weeks and months.

On our operational metrics, in North America we have increased our J.D.

Power dependability ranking.

However, we have some near-term issues which we are addressing leading to the mixed overall quality outlook for the year.

We are on track to achieve quality improvements in our international operations.

We expect US and Europe market shares to equal or improve from last year's results.

We expect total Company pre-tax operating profit to improve compared with 2010.

Commodity costs and structural costs are each expected to increase by about $2 billion compared with 2010.

The increase in structural costs is consistent with supporting higher volumes in the near-term as well as our plan to grow our business, strengthen our brand, and improve our products through our business planning period.

Although not shown, we expect our structural costs as a percent of net revenue to improve compared to 2010.

Based on first-quarter performance and our expectations for the full year, we expect Automotive operating margin to equal or improve compared to 2010.

Our outlook for Automotive operating related cash flow and capital expenditures remains in line with our most recent guidance.

Overall, our performance is off to a good start.

We remain on track to deliver continued improvement for full-year pre-tax operating profit and Automotive operating-related cash flow compared to 2010.

Based on the factors we have highlighted, the expected lower profit at Ford Credit, increasing commodity costs, seasonal factors that tend to favor the first half of the year, and higher investment and costs related to our longer-term growth and brand plans, quarterly results in the latter part of the year may not be as strong as the first quarter.

As the year progresses, we will take advantage of every opportunity to strengthen our business further.

Slide 32 summarizes our plan.

We remain focused on delivering our One Ford plan, which is unchanged; aggressively restructure to operate profitably at the current demand in 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.

While the global economic recovery is expected to continue, the external environment over the next few months is uncertain due to the events in Japan, geopolitical events in North Africa and the Middle East, and sharply higher oil and commodity prices.

We will navigate this period by staying on top of the issues and taking quick and appropriate actions to respond to whatever challenges and opportunities we may have.

Despite near-term challenges, our progress toward delivering profitable growth for all will continue to accelerate as we look ahead to the next few years.

We will continue to invest in strengthening and expanding our product portfolio through our One Ford strategy.

We expect our annual volumes to continue to grow substantially, driven primarily by our growing product strength, a gradually strengthening global economy, and an unrelenting focus on improving the competitiveness of all of our operations.

We expect all of these actions to result in a more profitable and growing Ford Motor Company.

2011 is a very important step in this journey.

Now we'd be pleased to take your questions.

Thank you, Alan.

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

We have about 45 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 in our timeframe, please keep your questions brief.

Tawanda, can we have the first question please?

(Operator Instructions) Colin Langan, UBS.

Good morning.

Based on your production guidance, it doesn't seem that Japan is at least in North America going to be that big of an impact from a production standpoint.

Any color on is there going to be incremental costs going forward from maybe reworking around supply disruptions?

Should we see some cost headwinds going forward or is that also not going to be material?

Sure, Lewis?

Colin, we don't expect it to be material for the whole Company.

We do expect to see some production losses for Asia-Pacific.

We have incurred between 12,000 and 14,000 in the second quarter and we will incur some more as we refill the pipeline with some of the components we have been short of.

There will be some sort of premium freight costs as we sort of accelerate the pipeline to make sure we don't lose production.

But I don't view those as material and there's a little bit of extra engineering costs as we've done some validation of alternative parts.

But again, nothing material.

So we stand by what we said two or three weeks ago that we don't see a material impact on the Company as of yet.

Okay, in terms of mix going forward, it was obviously a positive this quarter.

I would assume given where oil has gone and mix has gone, is that going to be a headwind going for the rest -- next of the year or are there reasons to think that perhaps the car probability mitigated that a bit?

I think I would maybe start with the overall economy.

I think we are pretty much in alignment that it will have an effect on the economic growth maybe up to 0.5 point.

But as we pointed out today, we feel pretty good about our guidance for the industry in the US at the 13 to 13.5 level.

And clearly in Ford's case with our complete family of vehicles especially with the enhanced smaller and medium-sized and the fuel efficiency of them, we think Ford is really well positioned to serve our customers.

Okay, just one last one.

Obviously European profits were quite a bit of a surprise this quarter.

Is that sustainable or are there any factors on the quarter that were sort of unique to Q1?

Maybe I'll start out and Lewis can add his color also.

But as we discussed previously, our plan in Europe starts with the product line and we have a number of new and refreshed vehicles and we are clearly seeing, as you saw in the net pricing, the customers appreciating the new family of vehicles.

And also our European operations have worked very hard to manage their cost structure plus we're also getting the benefit of our One Ford strategy on the efficiencies and leveraging our scale and our assets worldwide.

Lewis, do you want add anything else?

No, not really.

Colin, one thing first quarter of Europe is a typically strong absolute volume quarter within the SAAR because of the seasonality of the business, but other than that, the continued push on new products and avoiding chasing marginal deals I think is paying off for the European team.

All right, thank you very much.

Patrick Archambault, Goldman Sachs.

Good morning.

Actually just maybe to follow up on sort of the pricing issue, obviously that came through very strongly pretty much globally for you guys this quarter.

Can you comment just on the sustainability of that?

You have had a huge product push.

Perhaps that's maybe slowing a little bit now and you have also got competitors that are maybe ramping up towards the end of this year actually both in terms of GM and then perhaps afterwards some of the Japanese brands.

So how do you see that price momentum playing out perhaps in the latter part of the year and into 2012?

Sure, I think we sure agree with you that based on -- especially based on the strength of our product line and the fact that the consumers around the world now are really coming together on the main attributes that they value, especially the quality, the fuel efficiency, the safety features, and of course in Ford's case, the smart design.

And then with our scale, the very best value, we see them really valuing the products, whether they are small, medium, and large, because they are -- you can almost see a lifestyle, a life choice when you choose your vehicle, what works best for them.

But they want the content.

They want the features on no matter what size vehicle whether it's a Fiesta all the way up to an F-150.

So I think we're providing the right features, the right content for what people value today and we are really seeing it in the pricing and the value that they put on it.

Also, I might point out that as has been noted, a key part of our plan is to have one of the freshest Ford store showroom line-ups of anybody and to keep that cadence going forward and including -- and clearly we want our plan to achieve that objective.

And included in our forecast going forward is all the funding that we believe that's appropriate to have the freshest showroom around the world going forward, which I think will continue to be appreciated by the consumers.

Okay, great.

I guess on the cost side, you were more specific about the $2 billion this time around both on the I guess, commodities and fixed cost side in terms of inflation.

How do we think about the cadence of your global product initiatives as kind of an offset to that?

I think you kind of laid out some plans at the Detroit Auto Show.

Just could you refresh us on sort of where you are in your global platform programs and sort of when you see that really ramping up as a tool to kind of mitigate some of those costs investments?

I will start out and then we will also get Lewis's perspective.

But to your point, just an essential part, a fundamental part of our Ford plan is to leverage our assets worldwide and move towards our global platforms and appreciate both the revenue value of that plus also the costs and the alignment with the supplier benefits of that.

We are making tremendous progress.

And just using the latest vehicle, the Fiesta itself and now the Focus, where we are going to have 10 different top hats off that new C1 platform and 75% to 80% of the parts are exactly the same.

And it's being delivered in over 2 million, 2.5 million vehicles around the world per year.

So our fundamental plan, we really believe that goes not only with the vehicle itself, but the efficiency associated with the product development so we can generate more product in a more timely manner using less resources.

So we think the proof points that we have that we really believe are on the right track with that.

And, Lewis, would you like to add anything more?

Yes, we are sort of in the middle of implementing it, Patrick.

We have got Fiesta in production around the world.

We have now got Focus, the new Focus in production in Europe and North America, and it will be going around the world in the next couple of years.

We have got future opportunities.

We've made no secret that in the long term, the CD car is going to be the next major change.

I think the other area that you are seeing is the same is happening on powertrains.

It's not just vehicles.

It is on powertrains, so the announcement of EcoBoost for example in China and Europe is a very important step forward.

So I think we are on the journey, but there's a lot more opportunity ahead of us.

Because the last piece that we talked about in Detroit was we have value-enabled versions of our global platforms to look forward to as we go into the emerging and developing economies where price points were looking a bit lower and customer expectations are a little bit lower.

Great, thank you.

Tim Denoyer, Wolfe Trahan.

Good morning.

A couple quick ones.

On the Russia joint venture, can you comment on how that's going to be structured.

And is your St.

Petersburg plant going to be a part of that?

Yes, it is, and this is our strategy to serve the Russian market completely, so we are going to put in all of our Russian assets into this joint venture and operate as one company with a 50-50 ownership.

We feel really good about that for a lot of reasons.

One, it really gives us scale, dramatically increases scale right away, plus we are aligned with where the industry and the government want to take the industry.

So I think it's going to be a very positive thing for us going forward.

As we pointed out, this is going to be probably the largest market in all of Europe within the next couple of years.

So we are accelerating our implementation of this joint venture.

Okay, thanks.

And then (multiple speakers) Sorry, go ahead.

I said you are welcome.

And then a little bit more color on Japan if I could ask on that.

You said you don't expect a material impact on production outside of Asia Pacific, but can you give us a little bit better sense of your confidence that you have most of the parts that are sourced from Japan, either resourced or handled in some way?

You bet.

First of all back to the first part of your question, clearly we don't have operations ourselves in Japan, so it's mainly associated with our supplier partners.

And the reason that it affects the Asia-Pacific part of our operations more is that we have more localization of our suppliers in the region and in Japan associated with our Asia-Pacific operations.

Having said that, it's a relatively small part of our operation right now, although it's going to be one of our fastest growing going forward.

In respect to your second question, we have -- we are pretty diversified throughout our supply base around the world.

But as you know, as you go down to the Tier 1, Tier 2, Tier 3 suppliers, then you get down to many of the components that are sourced to everybody around the world especially in the electronics area.

So we have been -- as you have watched, we've been really scrambling to make use of all of our assets that are on the water, in the air with our supply base and of course with the dynamics change and with all of the OEMs, there are probably some opportunities for us to even serve some of our customers even better going forward.

So so far so good.

But I think the fundamental reason is as compared to our competitors, we have a lot less fundamental exposure.

Great, thanks.

One more -- one last one for Lewis.

In terms of the tax rate, can you give an update on the valuation allowance?

Did you say last quarter that you expect to accrue taxes at an elevated tax rate in the second half if you were to bring that valuation allowance back?

Yes, if we bring the valuation allowance back and we do expect to do that towards the end of the year, we would expect to accrue book taxes, not cash taxes but book taxes at close to the 35% rate.

Okay, 35% rate for the second half or for the full year?

For the full year.

If we bring the valuation allowances back, we will be restating taxes for the full year and will be at that rate.

Okay, and is your sense that that might happen in the third quarter or fourth quarter?

We have said towards the end of the year.

We haven't been quite so explicit.

Okay, thanks very much.

Itay Michaeli, Citi.

Great.

Thank you.

Good morning.

I wanted to go back to the question on some of the offsets you can have on structural and commodity cost headwinds.

I think last year you had about $1.1 billion offset from the line item labeled materials ex commodities.

I think this quarter was actually a bit of a negative.

But can you maybe talk us through how we should think about some of that offset throughout the rest of the year for that particular line item?

You bet.

Within that line item is both the material cost reductions that we achieved working with our suppliers but also the content we add to our new vehicles.

It's the content we add to our new vehicles that supports the pricing action that we've continued to deliver.

So I think as you think going forward, as our product cadence has been accelerating, I think you can expect to see product content probably exceeding our ability to offset it with cost reduction for the balance of this year, but that will also be the thing that's driving positive net pricing.

Right, that's helpful.

Then just a follow up.

Can you just talk us through how much visibility you have today on commodity costs in general, sort of what percent of it is locked up and just to kind of help us through thinking about sensitivities if we continue to see raw material inflation throughout the course of the year?

It's obviously something that is high on our agenda.

We think we have got our commodity impact gauged about right.

We have seen a little bit of sort of amelioration of the increases in steel for example that we think we are probably more or less locked in on steel.

But we think in total commodities we are probably slightly less than half locked in.

But we are assuming that commodities are going to be going up this year because we are assuming that the world economic growth is going to continue.

Great, that's very helpful.

Thank you.

Brian Johnson, Barclays Capital.

Yes, good morning.

I've got two questions, one on the cadence of cost development during the year, just following up on that commodities questions and structural costs.

And the second just on mix drivers.

On the commodities, it looks like you took $300 million of the $2 billion that you have in the planning assumptions.

And on structural costs, about $400 million of the additional $2 billion was in the -- that you guided to.

Can we -- does that imply especially on commodity costs that we expect to see that going up through the year, consistent with just your commodity price forecasts?

On structural costs, is that the typical backend seasonality, the fact it wasn't a bit over 500 given the production this quarter?

Yes, I think -- just hold on for one moment, Brian.

I will just double check down.

But I think the answer is the way you portrayed it.

We can expect to see commodity costs increasing during the year year-over-year and structural costs doing the same but biased a bit at the end -- fourth quarter.

Yes, especially with the new launches and the sales and marketing and branding.

The second question is around mix and I probably have a component for Lewis and for Alan as well.

If we look at the 400 million North American mix year-over-year improvement, is there any way of just qualitatively -- because I know you don't like to go into product profitability -- helping us understand and let's just focus on North America how much of that was F Super Duty pickups where you were off of a weak comp with the changeover to the new model last year?

How much was general, larger CUV, pickup trucks?

And where do you put mix effects like someone comes in, looks at a Taurus and says, yes, I want the Taurus SHO, I don't want the base Taurus.

And then secondly, especially on that latter topic for Alan, how are you working with your dealers to help manage price points and mix in terms of options, average transaction prices as customers look to downsize, but you still want to protect the profit margins per vehicle?

Whoa.

I think that's an 18-point question.

Some of it we are not going to answer, I'm afraid.

But in terms of what we called series mix, if a customer comes into the showroom looking for a certain product and trades up within the product range, we book that as series mix and that's in our mix analysis.

Similarly if, as many of our customers are doing, they specify the car with more options, that's also in the series mix line.

If they choose to buy a Taurus as opposed to buying a Fusion, that is in -- as you know, that's in product line mix.

But it's all in the mix analysis.

The more detailed questions of mix that you were asking us, I'm reluctant to give you that amount of detail, I'm afraid.

With respect to your last question, Brian, it's really interesting and it has happened across the entire product line.

But the customers are really driving this what we call this better mix, having more features, more things that they value.

Just one example is on the Fiesta, one of the most popular options or features are heated leather seats.

This is on a Fiesta.

Fiesta is a really neat vehicle when you look at its quality and fuel efficiency and safety and value, but you look at the features that people really do want and value no matter what the size of the vehicle, this is a tremendous change in the automobile industry because --.

And we really believe that they are making a lifestyle change now, and lifestyle choice.

And when they make a choice, no matter what size vehicle works for them, they want the very best quality, fuel efficiency, and safety and features.

And that was the point of view that we took four years ago and every one of our vehicles now is world-class competitive in that area.

So I think we are going to see this trend by the consumers to continue.

Just one sort of added element.

Within the North American mix improvement, about two-thirds of it was series mix, so that's really getting to the customers who see our products and wants to either buy the higher series or buy incremental options.

And as you know, that has been the whole philosophy behind our product stress.

You get vehicles that customers really want.

And value.

Himanshu Patel, JPMorgan.

Good morning, guys.

Two questions.

First, just Alan, I'm wondering if you've got a view on what the impact of Japan is going to be on industry pricing near term?

Well, you know, clearly we have a lot to play out here and there are a lot of announcements that are coming every day from all the participants.

I think with respect to Ford, we are going to absolutely stay committed to our fundamental approach of matching our production to the demand and clearly what with the strength of our product line now and the overall demand still staying we think between 13 million and 13.5 million that I think there's going to be some opportunity for us to serve even more of our customers or more of the consumers going forward.

And I think that's probably the best place to leave it today, because that's our fundamental plan.

Just given what clearly seems like tightening Japanese inventories in the coming months, could we -- do you think we have a scenario that unfolds where the SAAR may even soften up a little bit in the summer months but we see new and maybe also used pricing improvement?

Is that something that you would consider a reasonable probability right now?

Absolutely, because it will get down to the overall -- to your overall point of matching supply to demand.

Clearly with this much disruption, the demand is going to outpace supply.

Okay, and then just a bigger question on commodities.

There's obviously a lot of crosscurrents right now between the kind of commodity inflation you are incurring, what your suppliers are incurring, and then presumably they are trying to get some recoveries from you and presumably you are trying to pass some of that on to the final consumer.

I guess when you step back and kind of look at the whole supply chain and the pricing situation at the retail level now, do you have kind of the guess on how all of this settles out over the long term in terms of how the full commodity inflation burden is kind of shared between the supply base, the OEMs, and kind of how much gets passed on to the final consumer?

Would it be a reasonable bet at this stage to say it's sort of evenly distributed between those three categories or do you kind of have a view one direction gets a greater burden or not?

You know, we really don't to that granularity, but your fundamental premise is exactly right.

All three of those factors will play into it because the consumer at the end of the day and the demand will decide.

But clearly we will keep working on our productivity.

Our suppliers, as Lewis mentioned, continue to work on their quality and productivity, and so we will contribute part.

The suppliers are going to contribute part.

I think the consumers will make a contribution, too.

But we don't -- we haven't -- it's really kind of a little too early to tell how it's separated out into different pieces.

But I'm sure that all three of us are going to play in this.

And it starts with us, as we have talked about the most important thing that we can do is -- and it is the plan is every year, year after year we continue to improve our quality and our productivity.

That's the best thing we can do to deal with an uncertain world.

The only reason I asked that question is that pullout box that you guys have on slide 12 where you show Materials Excluding Commodities, I appreciate Lewis's explanation that that includes both content cost increases or decreases as well as essentially supplier price downs.

Are we getting to a point where maybe the reason that number is turning negative is not just that you're seeing content cost increases but also it's becoming more difficult to actually get the sort of price downs, if you will, that you traditionally would get from suppliers just because they themselves are feeling a lot of commodity pressures at this stage?

No, I don't think we are seeing that.

We are still seeing good progress with our suppliers on cost reductions.

I think what you are actually seeing is just the increased content we are adding to vehicles because that's what our customers are demanding.

I also just to add to what Lewis said, I think we continue to see a great opportunity for us to align even tighter with our suppliers around the world with our aligned business framework and also our One Ford plan of moving towards our common platforms, more commonality and more reuse of the parts, which is going to just continue to serve all of us to decrease the costs and increase our productivity for the whole value chain.

So I think we have a lot of opportunity to continue to improve in that area, too.

Rod Lache, Deutsche Bank.

Good morning, everybody.

Congratulations on the great results.

I was wondering if you can just dive into this pricing and incentive line a little bit with us, the 7 -- it added up -- I'm looking at slide 15, the North American year-over-year bridge pricing up 300, incentives 400.

That's about $1100 a vehicle if you just divide that by your volumes in the quarter.

I'm wondering first of all, is there some kind of a catch-up adjustment for the lower incentive levels on your vehicle stocks at dealerships reflected in that?

And I guess another way of saying this is J.D.

Power is showing something like a $600 decline of incentives from March to April and you did raise MSRPs a bit beginning in April.

Was that already largely reflected in the kind of pricing performance that we saw in Q1 or would there be further improvement in Q2?

There is -- you know, we book in the quarter the programs we have announced for the next quarter on the vehicles we have in dealer stock.

And so there is in the period where incentives are coming down, there is what you describe as a bit of a catch-up impact.

But, you know, the rest is pretty -- nothing special about the rest.

It's new product pricing and we did take a little bit of price at the beginning of the year as a general price increase.

Do you happen to know how much of that would be this quote unquote catch-up benefit?

And what -- should we be thinking that it could be kind of similar in Q2 year-over-year?

Or is it -- does it improve?

It's impossible to estimate that because that means you have to make an assumption about what the incentives are in the third quarter.

I wish life were that simple.

We don't know that.

Right, okay, but there was some effect I guess from some adjustments that were made.

Some effects.

And then I appreciate you giving us color on that mix improvement.

You said that two-thirds was just kind of series mix.

I guess I'm just curious, is there something in terms of the outlook that would cause mix to either improve or deteriorate from here?

I am specifically thinking about new product introductions that you have got in the pipeline on the positive side maybe.

And then there has also been some discussion of certain parts shortages, navigation systems, things like that.

Does that -- is that something that you are thinking about at least in the near term in terms of your ability to maintain the kind of rich mix you have been experiencing?

We're going to manage our way through any minor parts shortages and as you would expect, we will obviously be -- if we have to do any management, we will be managing in favor of the vehicles that have decent margins consistent with making sure our dealers are supplied with a good mix of vehicles.

But that's not a material effect.

We really don't see a material impact of the parts shortages.

So I wouldn't be thinking of that as a factor.

You know, in the near term, we just launched Focus, so as we go forward in the next couple of quarters we could probably see Focus as a bigger percentage of our wholesales than we saw this quarter.

So that might have a slightly negative product line mix effect.

But also as we go forward, the new Focus has this spectacular array of series and options that enable customers to trade up to some really nice, really well equipped vehicles.

So that would be an offsetting impact on that.

I think full year we are not expecting to see a huge impact either way.

Okay, it's just lastly, you did comment that typically first half production is stronger than the back half and you guys also made a comment regarding the fact that at least from Ford's perspective, the pace of demand is exceeding the pace of supply in the near term.

Are there any specific measures that you are taking at this point that you can kind of comment on that would allow you to maybe uptick or maintain kind of steady levels of production into the back half?

How are you kind of planning for that as you look into the pretty strong demand outlook through the rest of the year?

I understand, Rod, and I think our fundamental operating philosophy has really served us well and it's going to continue to be, and so what we are -- this matching our production to the real demand and having a point of view of that as quickly as we can and moving decisively, and having our systems set up to be able to move decisively is the most important thing that we're doing.

So clearly we are dealing with the near-term impact of managing all the parts and keeping the production going.

But clearly as we go forward here with our product line and the situation we are in, we are going to look for continued opportunities to serve our customers in even a bigger way.

Ladies and gentlemen, at this time, we would now take questions from the media.

Your next question comes from a line of Dee-Ann Durbin with Associated Press.

Good morning.

Thanks for taking the question.

Market share was down in markets outside of Asia just slightly.

I heard in the discussion that that was related to lower incentive spending and in Europe, reducing low-margin business and the scrappage programs.

I'm wondering if there are any other reasons in particular if pricing is perhaps the reason for some small share loss?

And also if you expect to regain what you lost as the year goes on?

I think overall, you mentioned North America too, but we maintain the same discipline in North America also of maintaining the value for our customers in the product and not following some trends or people or discounting them.

Which in the near-term, we did take a little bit of a hit in market share, but it's the right thing for running a profitably growing business for the long term.

And going forward, I just -- we continue to see more discipline overall in the industry to run the businesses as viable businesses.

And so I think the whole industry is going to keep focusing on profitably growing and as we pointed out in our guidance at the end, we anticipate that our market share overall for the year will be equal to or improved over last year, which is terrific in this environment.

Thank you.

Greg Gardner, Detroit Free Press.

Good morning, everyone, and thank you for your time.

In your forecast for second quarter production, there is a fairly ambitious increase over the first quarter and I wondered if that will require any hiring or adding of shifts?

And if so, where would that occur?

No anticipated adding shifts or hiring.

I might just add to that, Greg, that we also provided guidance previously, which we will reconfirm that with our view of the industry being in the 13 to 13.5 level and growing again at a slower pace than we have had -- than in the past but still growing with economic expansion that we anticipate adding 7,000 jobs throughout the US over the next couple of years.

Sure.

Jeff Bennett, Wall Street Journal.

Good morning, guys.

Lewis, I was hoping you could explain how you are able to contain the Japanese supplier issues to the Asia-Pacific facilities.

I guess is it your thought that you will take down production there when needed in order to protect the US because you see an ability to gain market share by producing more vehicles and getting more vehicles out on lots?

No, Jeff, explicitly not.

We are seeing some -- because as Alan mentioned, because of a higher localization in the Asia-Pacific region of the Asia-Pacific production, we are seeing specific issues which we are working our way through and we are going to have to take some down time while we work our way through it.

In the rest of the regions, we are in world-class scrambling mode at the moment but there have been some issues that we've worked our way through.

There was a lot of parts in the air coming over to reduce the time duration from source to destination.

And as we said, the Japanese suppliers are doing a magnificent job of getting their facilities up and running and helping us where necessary find alternatives.

So we are not starving a region to help another region.

The issues in Asia-Pacific are unique to Asia-Pacific and we are on our way to solving them.

As we've said, there's not going to be a material impact on profitability for the Company.

So do you think that if you did need to boost production here in the US even more because there is more of a demand, would you still be able to do it?

Do you think you can still get the components that you need to do that?

Well, that's why we are continually assessing that, because there's a lot of uncertainty, as we have talked about.

We have been very fortunate as we shared to find workaround solutions and pull planned slowdowns forward and work the whole production system to honor our commitments for production for the first quarter.

And as we shared, we think we can absolutely honor our commitments for the second quarter.

And as you would imagine, we are looking at how we could increase production to support the increasing demand.

Okay, thank you.

Keith Naughton, Bloomberg.

I was wondering, Alan, if you could provide some more detail on the near-term quality issues you mentioned that caused you to miss your quality target?

Absolutely.

We're gaining momentum all around the world and we have been and as we pointed out, in North America we have a few items that have come up in the near term which we are aggressively addressing.

But you can imagine that our fundamental philosophy has not changed.

We've made great progress on it, but we are going to continuously improve forever and we are going through a big transition here and we are growing and we're just going to stay absolutely focused on improving our quality every year going forward.

Thank you.

Ben Klayman, Reuters.

Thanks for taking my call.

I just wanted to understand, so last quarter, and I hadn't been covering the auto industry then, so I apologize, but you guys missed Wall Street expectations and my understanding was is that people had said there needs to be better communication with Wall Street.

And this time you guys blew past expectations by a wide margin.

I'm just trying to understand why there's this dissonance where -- what are they missing or what are you guys not telling them that they are not even getting close?

Sure, it sounds like you are referring to the fourth quarter of last year.

I'd be glad to give you my perspective about that.

We -- the best thing that's happening is that we are communicating more and more and we are all coming to even more fundamental understanding about the fundamentals of the business and the parts that are seasonal.

And we thought we had communicated that the last part of the year in the fourth quarter we would be investing more, our costs would be going up because we are investing new products and branding in the brand itself, increasing the production, which was the plan.

Clearly we learned that we could do an even better job of that.

I think you can see by the quality of the conversation today and with the data that we put in for the first quarter in showing that seasonality affected the first quarter this year or the fourth quarter last year that -- I think we are communicating a lot better about the seasonality and the fundamental plan.

So I think it's an ongoing thing that everybody understands exactly where we are going and when we do our investments to profitably grow the Company over the long-term.

So I am very pleased that we are getting closer.

Okay, one other question.

Just to understand -- so which vehicles -- given sort of the mix shift, what are the profit drivers for you guys now?

Is it sort of the small Focus and Fiesta or is F-150 still a big profit driver?

I just wanted to understand which are the profit drivers for you guys right now?

Yes, we want to grow the business being profitable on all of our vehicles, and that's the plan.

Okay, thank you.

Could I just -- I want to clarify a comment that I made to Itay at Citi.

We were talking about product lines and series mix and I think I got them the wrong way around.

In the full year, we are expecting it to be more series mix than product line mix, but in the first quarter, it was more product line mix than series mix.

I apologize for that.

Alisa Priddle, Detroit News.

Hello, gentlemen.

Now that you have had such a strong start to the year, obviously your goal is continuing to return to investment grade and I'm just wondering if this strong start makes you more optimistic that that goal is a little closer and if you have any kind of timelines?

Well, we really are pleased with the progress and remember, when we laid out our fundamental plan and we went to the banks and showed them the plan and we invested that home improvement loan at that time, our plan was to improve our fundamental operations based on the strength of our product line and all of our productivity improvements and generate profits and free cash flow and then start repairing our balance sheet and paying back the debt.

It really is a neat proof point to the plan because if you look at last year, 2010, we actually repaid $14.5 billion of our debt.

And then as we noted today, we reduced our debt by another $2.5 billion in the first quarter.

That's $17 billion since the first of last year.

And clearly we are down -- the debt is down to $16.6 billion now and we are rapidly moving to being appreciated for investment grade.

We don't have a time period that we are putting on that because we are continuing to look at all of the sources and uses of our cash.

But clearly when we have given guidance today that we are going to improve our profitability and our free cash flow in 2011 over 2010 , that gives us some tremendous options on the uses of our cash and to continue to move aggressively to investment grade.

Which is fantastic for the Company because not only for the Company but also for Ford Credit because their cost of capital goes with the parent.

So it is a very important objective for us to get back to investment

One other thing that as Alan said, it's important to Ford Credit and actually the recent borrowings we've been doing for Ford Credit are -- the spreads are very close to investment grade now.

So the lenders are recognizing the progress we've made on our balance sheet probably ahead of the investment rating agencies, which is probably what you would expect.

Is there a debt level that Ford Motor Company at which point you think that triggers it?

No, we are enthusiastic about improving our balance sheet full stop.

And the rating agency will tell us when we have triggered it.

But this is really driven by -- we want a good robust balance sheet for the future and then when we get there, the rating agencies will recognize all we've achieved.

Okay, thank you.

Ladies and gentlemen, at this time, we will now take additional questions from our analysts.

Your next question comes from the line of John Murphy with Bank of America Merrill Lynch.

John, are you there?

Adam Jonas, Morgan Stanley.

Wow, heated leather seats on a Fiesta.

Who would've thought that?

It is a nice surprise.

We could ease you into that, Adam.

You'd look good in that.

Snazzy.

Back to Japan and the impact on North America, I must admit I'm a bit surprised how confident you seem to be.

I know visibility is poor, but how confident you seem to be on standing firm to the 710,000 second-quarter production.

Is that -- should we interpret that as kind of, look, it's still your best estimate, it's too soon to tell?

Or is what you're telling us we have actually really been able to make a kind of root and branch analysis of the upper levels of the supply and knowing what's in the air, we really have audited this and that is a pretty good number?

It's the latter, Adam, because we're looking out.

This is our guidance and we're looking out using all the visibility that we have.

We have been doing this every day, as you know, the way we manage our operations worldwide.

We -- with this crisis, we have been meeting every day and all the way through Tier 1, Tier 2, Tier 3, all throughout the supply chain.

We still get a few surprises every day, but we move decisively on the new knowledge and this guidance reflects our very best assessment that with our supply chain and the alternatives that we found and the workarounds and the factory and the suppliers themselves that this is our very best projection for the production for the second quarter.

Now, having said that, as we have pointed out, we are going to monitor this aggressively every day and work the problems and if it turns out that something comes up that we don't know about, then we will act accordingly.

But this is our very best guidance going forward.

Thank you.

I know the situation is day-to-day but would you say that for the most recent days at least you are putting out the fires faster than new ones are coming out with respect to the Japanese supply disruption?

Absolutely.

You can imagine what it was like at the first when we couldn't get commitments on anything and all of our charts were red.

It has just been fantastic to see the reds go to -- yellows go to greens every day as everybody throughout the supply chain has worked this together.

So the way we are doing it and the visibility, we are very pleased with this guidance.

Excellent.

The only other question was just any profit impact from the quality efforts that you highlighted that you need to kind of do some catching up on?

Is this the kind of stuff that from a profit perspective is already provisioned for, no material impact?

Or could there be something in the subsequent quarter or two?

No material impact.

Okay, thanks very much.

Tawanda, we have time for one more question, please.

Chris Ceraso, Credit Suisse.

Thank you very much.

A couple of questions on mix and price.

First just a housekeeping question on the 710,000 units.

What's the split between cars and trucks there?

Is that any different from your first cut?

I don't have the details.

I don't think it's significantly different from the first cut.

I'm sure it's not significantly different.

And then in light of your comments about the series mix and how you are getting great content on smaller products, maybe we can do a hypothetical on -- let's admittedly an extreme case, if you have someone that swaps out of, say, an F-150 into a Focus I think in years past that might have been a pretty negative trade-off for you in the I don't know -- $5,000, $6,000, $7,000 contribution range going the wrong way.

What is that like today given some of the up content that you're seeing in the smaller vehicles?

It's a lot better but we wouldn't go into that amount of detail.

You know that.

And it's quite a hypothetical example.

Although we are seeing customers trading large cars for small cars and being equally delighted.

Is it at least --?

It's still a negative trade-off but that gap has narrowed, will you concede that?

Yes.

Okay, and then just -- I'm sorry, go ahead.

Chris, I'll just add one more thing.

That's again the fundamental reason as you know well why we're moving to our global platform, so we can continue to appreciate the synergy and the scale of our global platforms, so we can continue to work the profitability.

And then just lastly on your capacity in North America, to the extent there's an opportunity maybe to pick up some share as your competitors see their inventories dwindle, where are you at right now if you look at North America on a straight time two shift basis, where is your utilization?

82% -- 92%, sorry.

I think the thing we will be watching if we try and produce more vehicles is not just our own ability to build in the assembly plants but the powertrain capacity and it will be a supply capacity as well.

So it won't just be us.

It will be -- the supply base has already come up a long way from last year and I think we will just have to keep watching where the bottlenecks are and work our way through those.

The entire value chain.

Okay, thank you very much.

Thank you.

That concludes today's presentation.

We thank all of you for joining us today.

Thank you for joining today's conference.

That concludes the presentation.

You may now disconnect and have a wonderful day.