Micki Maynard – The New York Times Bryce Hoffman - Detroit News Tom Krisher - Associated Press Amy Wilson - Automotive News Bill Koenig - Bloomberg News John Stoll - Dow Jones Sarah Webster - Detroit Free Press Jeff McCracken - Wall Street Journal

Good day, ladies and gentlemen and welcome to the Ford Motor Company fourth quarter earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Raj Modi, Director of Investor Relations. Please proceed, sir.

Thank you, Cindy and good morning, ladies and gentlemen. Welcome to all of you who are joining us 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 this morning are Alan Mulally, President and CEO; Don Leclair, Chief Financial Officer; and Mark Fields, President of the Americas. Also in the room are Peter Daniel, Senior Vice President and Controller; Ann Marie Petach, Vice President and Treasurer; Mark Kosman, Director of Accounting; and K.R. Kent, Ford Credit's CFO. Before we begin, I would like to review a couple of quick items. A copy of this morning's earning release and the slides that we will be using today have been posted on Ford's investor and media websites for your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included in our Form 10-K for the year 2006. Additionally, 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 their 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 here. Additional information about the factors that could affect future results are summarized at the end of this presentation. These risk factors are also detailed in our SEC filings, including our annual, quarterly and current reports to the SEC. With that, I would like to turn the presentation over to Alan Mulally, Ford's President and CEO.Alan Mulally: Thank you, Raj and good morning, everyone. We will begin by reviewing a few of…

Thanks, Alan. Over to slide 6. This shows our standard financial metrics for the fourth quarter and the full year. Fourth quarter and full year revenue were down from 2005. That reflected lower volume, higher incentives and adverse mix, mainly on the automotive revenue decline and revenue was also down in total because of the sale of Hertz late in 2005. We are changing our reporting metric on unit sales from vehicle unit sales to vehicle wholesales. Wholesales are better aligned with profitability and we have it included in the appendix of this presentation to provide relevant historical information. Wholesales for the fourth quarter and the full year were both down from year-ago levels. Also, we are showing our book equity here at the bottom of the slide and as we mentioned last quarter, a new accounting standard, no. 158, was issued in September. This changed the accounting for pensions and OPEB to reflect previously unrecognized amounts, such as assumption changes, benefit plan changes into equity and these amounts previously were disclosed in the footnotes. The new accounting standard does not affect the amount of pension or OPEB expense. Slide 7 provide some details on our special items. Special items reduced earnings by $3.8 billion pretax in the fourth quarter and primarily reflected a charge of $1.9 billion for personnel reductions, mainly related to the enterprise-wide buyout. In addition, there was a charge of $1.4 billion for pension curtailment related to the North American hourly separation programs. Finally, we continued to reduce personnel outside of the U.S. and charges for this were $420 million. These were mainly at Volvo, Ford Australia and Jaguar and Land Rover. Slide 8 shows the pretax results by sector, excluding special items. The total fourth quarter loss was $2.1 billion. That is $2.6 billion worse…

Thank you, Don. Before we take your questions, I'd like to close by reiterating our four key priorities: First, continuing the aggressive restructuring of our automotive business. This requires taking dramatic steps which have already begun. In 2007, this will mean further progress on reducing our operating costs while also strengthening our presence in key segments, such as our crossovers and our passenger cars. Second, we will continue to focus on our product development and manufacturing efforts. A top priority will be the development of a truly global product plan, one that takes full advantage of our global assets and resources. As the company moves faster to build cars and trucks people want and value, we will reduce the complexity of our vehicles by having fewer engine and transmission combinations, fewer platforms and more [top hats] and as we make our investments in new products, we will continue to improve our production systems' quality, productivity and flexibility. Our third priority is the one we have accomplished, funding our plan. Going forward, we will ensure that capital is used wisely and always with an eye towards creating value for our shareholders. Finally, we will remain focused on teamwork, responsibility and accountability. The core values of our fourth priority, working together. This means a continuous focus on how our progress measures up against our promises and on what we must do to deliver even greater improvement going forward. In summary, we know where we are. We are dealing with it and we are on plan. With that, we would like to take your questions. Thank you.

Thank you, Alan. Ladies and gentlemen, we are going to start the Q&A session now. We have about an hour for the Q&A. We will begin with questions from the investment community and then take questions from the media who are also on the call. In order to allow as many questions as possible within our timeframe, I ask that you keep your questions brief so that we don't have to move callers along after a couple of minutes. So with that, Cindy, can we please have the first question?

Thank you, yes sir. Your first question comes from Rod Lache - Deutsche Bank.

Good morning, everybody. I have got two for Don and one for Alan. Just really quickly, Don, you had previously given a walk from 2006 to 2009 and it looks like the starting point now is closer to $6 billion loss in North America; I think you had previously walked from $5 billion. Can you give us a little bit of an update on that? There has been some talk about bidding activity on some of these ACH facilities like Sterling. Can you elaborate on what is happening as far as resolving those issues? Thirdly, Alan, do you have any preliminary thoughts on these proposals from the President on healthcare taxes and these moves? Do they have any bearing on your thinking strategically as far as healthcare or CAFE cost savings?

You bet. We will start with Don.

We will go in order. Rod, we showed that chart on our November 14 conference call and at that time, we were in fact forecasting just about this same level of loss in North America. As you may recall, we had some bars that had numbers in them and we had some bars that didn't; and that first bar in '06 actually was slightly more than a $6 billion loss. So actually since that time, things have gotten just a little bit better, mainly on the cost side and it is very consistent with what we have said. So our plan going from '06 to '09 achieving profitability is essentially as it was. So to repeat, the '06 number that we showed on that chart was about $6 billion loss for North America.

Okay. And you had $3.6 billion going forward as the planned cost savings? You had $5 billion in total, and now you're saying that $1.4 billion was in 2006 already? So $3.6 billion going forward?

And on that chart we had showed $4 billion and now if you stay exactly with the arithmetic, it is $3.6 billion. But I have to tell you that Mark Fields and his team have a plan to get to profitability in '09 and we have been through it time and again -- we go through it with Alan every Thursday, as you know -- and it is right there and we are on track. Now on ACH, as I mentioned, we have reached agreement in principle to sell three of those businesses and we have announced the closure of four other locations. That puts us almost halfway through that. We are having discussions with several suppliers and we really don't want to go any more into it than that. When we have something to share with you, we will share it.

Rod, on your question about the State of the Union message, we will clearly continue to evaluate exactly what that would mean to us, but I would be pleased to give you my initial reaction. On the healthcare, with the $15,000 deduction that is in the proposal it looks like we would not be hurt by that. On the positive side of that, I think it is terrific, like all of us believe, that the administration is trying to move forward to deal with this very important piece of our competitiveness and we are absolutely committed to working with the administration on improving our competitiveness for all manufacturing in the United States. On the energy policy, we are very pleased with the way the President presented that, by looking at a total reduction on oil without getting into the specifics on how we would do that as far as the CAFE rules. Clearly with the number that he put out, it would be very aggressive if you accomplished all of that with just fuel mileage increase each year; but he also committed that he believes the right way to do that is to have the Department of Transportation and the experts and the automobile industry really determine what we can do with all of our investment-enabling technology and then make a reasonable proposal going forward. So again, we are committed to working with them and we think we have room there to develop a viable improvement plan that doesn't hurt us.

Your next question comes from Himanshu Patel – JP Morgan.

Good morning, guys. Three questions as well. First one for Alan. Alan, you have set up a decent amount of liquidity now. I am wondering, would you be interested in using some of that liquidity to engage in a deal with the union whereby you potentially would buy out the healthcare benefits? Number 2 for Don: on the cash flow statement, just a little bit more color on what the big cash inflow source was on other payment timing differences? Was it incentive accruals or something else? A third one for Alan again. Thoughts on Jaguar and Volvo now. Have you guys, after having looked at the business, any sense of what you would like to do with that going forward?

You bet. Let's see if we can do this in the order that you asked them. On the healthcare and our liquidity, we believe we are in a really solid position on liquidity to handle not only the automotive losses, but the restructuring charges and to have a cushion to deal with unforeseen larger economic cycle events going forward. On the healthcare and specifically what we do with the union, in our dialogues, we have everything on the table, all the elements of our competitiveness that we are talking to the UAW about and clearly some of the more recent agreements that people have made have some pretty innovative features in it, like the arrangement with Goodyear; so we are clearly looking at all of those and they will be in our dialogue on increasing our competitiveness with the UAW. We have no specific plans to move that healthcare to the union. Don, do you want to take the second one and I will come back?

Yes, the biggest piece of the expense and payment timing difference is pension and OPEB. That is normally what it is and that is what it is this year. There are other things that tend to be more variable, such as marketing reserve changes and warranty reserve, but the biggest piece of it is pension and OPEB.

Is there any sort of reversal on that in the next quarter, Don?

No, that will be a long time before that reverses, many years out in the future.

On our portfolio across the world, we are continuing to evaluate all the brands and their financial performance and projections and we have made no additional decisions except for Aston Martin, which is proceeding on our schedule to divest of that good business this year. On Jaguar and Land Rover and Volvo, I would like to comment though that we are very pleased with the progress that all three of those businesses are making, especially over this last year. They are continuing to improve. They've got a very good product lineup of Volvo is coming back really strong. Jaguar is making great progress on their cost structure, to also support their new product line. And of course, Land Rover is doing very well. So even though some of them are coming back from a loss position, we are very pleased with their progress, both on the quality of productivity and on the product development. We will continue, as any good business, we will continue to look at our entire portfolio strategically and operationally going forward, but no additional decisions as of now.

Your next question comes from Jonathan Steinmetz - Morgan Stanley.

Thanks, good morning everyone. A couple of questions; first a big picture one for Alan, and then one for Don. Alan, I guess with $5 billion plus in automotive losses and you are talking about $3.6 billion of incremental cost cutting, the math doesn't work through '08 in any way to get anywhere near profitability. I am just wondering what you need to see to put out some additional cost-cutting targets, what extra information you need to gather here and how long you think that process takes?

Well, going back to where you started, our plan is to take out $5 billion by 2008 and then continue our cost reduction forever. In our plan, you mentioned 2008 -- I think you probably meant 2009 -- our plan is to return to profitability in 2009. As we discussed, we have taken out about $1.4 billion up until now and so we feel like we are right on plan through this year and next year to take out the $5 billion. The more that I review the details, the more confident I am that we can continue that cost reduction through 2009 and on. Now having said that, the operating mode that we have is to have a solid plan that we absolutely believe that we can deliver on. Every quarter, every year, I keep looking, I keep identifying the risks and identifying the opportunities, mitigate the risks and keep looking for more opportunities to improve the plan incrementally. I think over time, we are going to be able to do that.

Don, on the Credit company, I guess the provisions were about $30 million in the quarter, the charge-offs are almost $200 million. You talked about that being unfavorable next year. Can you give any clarity on how unfavorable we should expect that or where maybe that allowance account goes? I mean is this going to start being a couple hundred million dollar a quarter line item on the provision side, in all likelihood?

Let me come back to one thing on that question you asked Alan, just so we are clear, coming from the $5 billion automotive loss this year. That included a large one-time dealer inventory reduction in the fourth quarter that we don't expect to repeat. So the running rate that we are coming from for 2006 is not nearly as good or bad as it seems, and then you put on the cost reductions, the 3.6, plus the continued cost reductions in '09, and that is how that math works. On your credit question, I am going to ask K.R. to answer that.

Jon, on the credit losses, they are a function of the portfolio quality, the servicing and collection practices and obviously the economic conditions. Over the last several years as we have improved the quality and improved our servicing and collection practices, you have seen the improvements we have had in the reserve itself. Going forward, a lot of it depends on how the credit metrics continue to perform. In the last couple of years they have been performing very well. It won't be as large as we've seen in the last couple of years, but it might be a little bit of an improvement but not very large.

Your next question comes from Eric Snell – JP Morgan. Eric Snell – JP Morgan: Good morning. Just two follow-up questions: one, Himanshu's question on the buy down of the healthcare, I was just wondering how has the union, Alan, received potential changes in the retiree healthcare, given that the current contract does go to 2011? I mean when it was done, it seemed like it was an untouchable and now it seems like it is an attainable goal.

You bet. Let me just make a comment and then I will ask Don for his opinion too, for historical context. We have continued to talk about this with the UAW and my understanding, Don, is over the last few years, we have made a lot of progress in the retiree healthcare area, especially. I am very pleased and positive with the UAW's response to working all the elements of continuing to improve our productivity and I am cautiously optimistic that it is going to be a big part of our negotiations this year. Don, you want to add anything else?

No, I don't think so, Alan. I think I will just mention as well that we have had a good and constructive dialogue with the union; that has been continuing. We have a number of things that we need to do and we both want to work together and our goal is to improve the competitiveness of Ford Motor Company here. That is about as much as we want to say about it now. Eric Snell – JP Morgan: That sounds great. The second question is on Ford Motor Credit, there was one line item, a bullet point to one of your slides back in the fourth quarter talking about Ford Motor Credit's profitability declining in '07, but increasing in 2008. And as I look out, as the prior question, consumer losses are probably going to increase, the portfolio is going to shrink and financial margins are probably going to be lower. What is going to offset that 2008 versus 2007 beyond the branch consolidation and people cut? I have got to think that there has to be a bigger swing number there.

There are a lot of things involved there and there certainly are improvements in operating costs. In 2007, we are in the process of doing the restructuring and then in 2008, you see the benefits of the restructuring, so there is actually quite an improvement in operating costs from '07 to '08. But the main thing that drives the profits is we tend to price from Ford Credit to the auto company in arrears of the change in interest rates. So in a rising interest rate environment, the margins of the Credit company get squeezed and then as interest rates stabilize, eventually the margins catch up. Then if interest rates go down, the interest rate because we price in arrears, margins will expand. So that is what you're seeing there is a margin expansion in '08. Eric Snell – JP Morgan: So basically it is like a raw material. It is sticky on the upside, but you benefit if it were to drop or stabilize as you pass that through?

'07 is the trough of profitability for Ford Credit. Eric Snell – JP Morgan: Is there any effort to move towards shoring up better financing, potentially through the conduit program you guys have in Brazil? Is there any thought to doing that in the U.S.?

No, we have a number of things that we are doing on the funding front. We've got a lot of sources, a lot of flexibility. I think we ended '06 with $22 billion in cash, so we have a lot of flexibility and a lot of alternative avenues. We have pursued those kinds of things in the past and we may continue to selectively, but I don't think so here in the U.S.

Your next question comes from Chris Ceraso - Credit Suisse. Chris Ceraso - Credit Suisse: Thanks very much. A couple of points of clarification and then more of a strategic question. First, can you just give us a feel for where we are on the Super Duty launch, you started building those -- when will they be available? The second one, on slide 35 Don, you mentioned that including special items, results would be much better, but I just want to clarify that ex items, net results for the business will be worse year to year? The more strategic question, market share. Can you just talk a little bit about how you expect to see market share trends shape up in the near term? Will you dip below that 14% to 15% target? Maybe talk about where you see retail share in 2007 and then do you expect it to come back up in the later years to be in line with that target?

You bet. We have got Mark here and he was actually at the Super Duty launch. So it would be fun for him to give you a perspective on the acceptance.

On the Super Duty launch, as you know, we went to manufacturing launch late last year. So we have been working our way up the ramp-up curve for production. We actually just started shipping both gas and diesel units earlier this week. So those will start showing up on dealer lots in the next couple of weeks and we will have a market launch sometime mid to late February. So the launch is going extremely well and we're very pleased with it.

Do you want to cover the market share, Mark, on North America?

On the market share trend question, Chris, obviously our target throughout the business plan period is to be in the 14% to 15% range and we have said within that, our focus is going to be primarily retail share during that time period. Most of that share loss we expect to come out of fleet sales. As you look at 2007, we ended 2006 at about 10.8% retail share. Our objective going forward in '07 is to achieve somewhere in the range of that range -- somewhere in the 10.5% to 11% range. We think when we look back on how we are going to achieve that, obviously we have some key products coming into the market like the Super Duty, which is 40% of our F-Series sales. Our new Escape, which is a very high-volume segment, which also is a segment that is growing quite well these days, as well as the freshened 500 and Freestyle and then the Focus a little later this year. As well as, we will have a full year of the Edge and the MKX, which launched late last year. So I think we are being realistic. When we look out a little further to your question of, will the share come down and dip up on retail, I think we are being very realistic and our goal is to stabilize that. As we come out with new products, we will see how we do in the marketplace, but I think we are being very realistic in our share assumptions going forward.

Especially dealing with the stopping of the Taurus and the Freestar and the Monterey.

To your question on profits, I think I would like to answer that by going back to slide 34 and just going through the whole list to make sure we are all straight on what we are saying here. As far as the automotive operations are concerned, that is in effect earnings before interest and taxes, we expect to improve from '06 to '07 -- not by a lot -- but we expect an improvement. We expect the interest, the other automotive will be worse because of the interest on the new financing that we acquired in December, as well as a non-recurrence of a tax benefit in the third quarter of 2006. So total automotive, including interest, will be worse. Then if you go all the way down, the Credit company will be worse -- as we discussed -- because of the margin pressure and the non-recurrence of credit loss releases because of lower volume. So in total, the pretax results excluding items will be worse. The tax situation will be worse because we had a tax offset to the losses in '06 and we will not have that in '07. In fact, we may have tax expense in certain jurisdictions to go along with the losses in other jurisdictions. So taxes will be about zero this year and they will be worse than last year. So the after-tax results, excluding items, will be worse, but we will have far less in the area of special items. We mentioned going from $12 billion down to $1 billion or $2 billion, right around in there. So the net results, net income will be significantly better for the company this year. Chris Ceraso - Credit Suisse: One quick one, Don, if I can. Where do you see pension and healthcare expense in '07, just a ballpark?

I think pension and healthcare expense will be about the same. I think we will have higher service and interest costs and that will partly be offset by the full year effect of the UAW healthcare. We had that in for about half the year in '06. We'll have a full year of that, so a little improvement there. So I would say it is about the same.

Your next question comes from Ronald Tadross - Banc of America Securities.

Good morning, everyone. I have one question for Alan and then maybe another one for Don. Alan, on the timing of the labor negotiations, could you just tell us a little bit about what is happening now and when do you whittle down the issues on the table to the ones that are important? Don, the $1 billion increase in commodity costs, does that mean your product costs in '07, your total product, will be up or down?

Well, let me take the product cost one first. The commodity costs are going up $1 billion and we expect our total product costs to be nearly offsetting that.

So you'll be flat overall?

Close to that, yes.

On the union negotiations, we haven't started the formal negotiations. As you know, that timing is led by them as they talk to all three of the companies here. But we continue to work with them on all of our quality and productivity issues in a normal way, but that schedule, I would think we will know a lot more about that from them over the next couple months.

And then, Alan, I think you took a strike at Boeing. I know it's a bit of a sensitive issue. Maybe you could just tell us philosophically how you think about a strike, because I think a lot of investors believe really to make the significant gains in a business, companies need to take a strike.

Sure. I'd be glad to give you my thoughts about that. I have always approached it by really focusing on the business and what is required to make the business more competitive going forward because the only way for this to work for all of us is if we execute this turnaround and we deliver a viable, profitable growth going-forward plan for Ford; because if not, then all the constituents, all the stakeholders, the only way we can all benefit is if we have a profitable growth for all going forward. So my focus has always been on what does it take to improve our competitiveness going forward? I have also been very respectful of the union as an institution and either one of us, the union or Ford, can destroy the Ford Company. So it is not about taking a big stance. I think it is more about what do we really need to do to improve the competitiveness of Ford? The strike that you mentioned at Boeing with the IAM, we did have a short work stoppage, but we got to the place where we really got down to the issues of what it really takes to be competitive and for that moment, we couldn't come to an agreement. But as you noticed, the dialogue was so clear and so real that within a few weeks, we were able to all appreciate that we were going to really hurt the corporation and hurt each other that we found a way to take the final steps together and still move the company forward as far as our productivity and financial performance. So that is my general approach to negotiations.

I appreciate that. It seems like the union needs to save face in front of their members, or at least look like they are working for their members. Is there anything other than a strike that you think might help them do that?

Well, I am really pleased with the cooperativeness and the relationship that Ford has with the UAW leadership. Even though we have agreements in place, we have continued on both sides to improve our competitiveness since the last fundamental agreement was signed and all of our cooperative operating agreements with each of the sites and each of the locals, everybody has been working the competitiveness of Ford. I look at this as just another step on a relationship and an attitude that the only way this is going to be good for everybody associated with Ford, including the employees and the union, is if we keep finding ways together to improve our competitiveness. So I don't think of this as a one-off, one-time big deal as much as a continuous improvement in our competitiveness where both of us are committed to it.

Your next question comes from Robert Barry - Goldman Sachs.

Hi guys, good morning. Just a couple of housekeeping items and then a bigger picture question for Alan. One is in the past, I think you had indicated that the interest expense would track -- or the other category -- would track at about 150 to 200. You said it is now going to be worse. Is there any better sense you can give us on numerically what that would be?

I would say you could use about $300 million per quarter for that. If I could, I want to come back on one question we had earlier about the pension and OPEB expense. I was not thinking about the change in discount rates and that would really swing things to a slight decline. So we expect slightly lower pension and OPEB expense in '07 compared with '06, reflecting the things I mentioned from the first time I tried to answer it plus the discount rate. So slightly down on that.

On slide 13, the volume mix bar, could you roughly break out what part was volume and what was mix?

Yes, the volume and mix is about 20% volume and the balance is mix.

The big picture question is on the move to common global platforms. I am trying to think about what is happening here that is different and when it is going to have an impact. Because I feel like there has been a move to common platforms by Ford and most OEMs for some time. Are we on a different trajectory now, or is the plan to be on a different trajectory? When will the incremental impact come? Is it something that really won't start to show up in the results until a few years down the road as you start actually designing and starting to manufacture new products?

I think you've got it exactly the way we were looking at it. I was very pleased at the progress, the initial progress that Ford has made around the world, because as you know in this area Ford traditionally has grown up as pretty independent Fords in the Americas, in Europe and Asia Pacific, but a few years ago, the leadership decided that one of the competitiveness factors going forward would be that we would actually use more of our products and leverage these assets and resources around the world. We have done that not only with the Ford brands, but also by utilizing the best practices at Mazda and at Volvo. So I would characterize our plan going forward now as accelerating that trend and we have just so much opportunity to do it because in the automobile industry with the investment we make each year -- not only in the product, but also in capital on the manufacturing side -- that we can absolutely design or create this new product family and our new more flexible, more efficient production system every year going forward with every model introduction. So our plan is that with every new product development, that we not only develop the new product, but we also do it and leverage resources across the world, and we also link that together with the manufacturing plan and more flexible manufacturing with more of the platforms in each of our manufacturing facilities as we drive the quality of the productivity also. The good thing is that it can happen pretty aggressively because just in North America, as Mark has pointed out, our plan is to refresh 70% of our products by 2008 and have 100% of them refreshed by 2010. I think as we go forward here that next year, the year after, every year, we will continue to improve our operational performance by this key strategy.

So as you are essentially refreshing the products, you are moving them on to what you would target three years down the road or five years down the road being a few global platforms?

Exactly -- exactly. Because the neat thing is because of how much we do each year, that you have a real opportunity with every introduction to create not only a more efficient platforms, but a more efficient production system.

Do the gains slowly build over time or is it one step back, two steps forward?

I think it is going to be steps forward, not steps back. We are where we are. We have a solid plan and the operating rhythm that we have described is that we wanted to make sure we had a really solid plan going forward, and then each year with our product development and our capital expenditure, we have a vision out there now that we're getting clearer and clearer on, about where is the manufacturing footprint going to be, what are the vehicles in the line-up going to be, what is going to be the rationalization of the product line inside each brand. Every year is another step to a simpler, more efficient product line and production system. Also I might point out that we talk a lot about the vehicles themselves that we see, the top hats and the platforms, another tremendous opportunity for us is to do the same thing on the engines and the transmissions. So we have that in the plan also.

Rob, this is Don. Just to come back on your question on 13. I misspoke. It is 80% volume, 20% mix for the fourth quarter on the bars and for the full year, it is about one-third mix, two-thirds volume. Of the volume in the fourth quarter, a large chunk of that went to dealer inventory reductions.

Cindy, could we have the next question please?

Your next question comes from the media from Micki Maynard – New York Times. Micki Maynard – New York Times : Good morning, everyone. I would like to have you walk me through some numbers here because Don, you were giving your discussion, you said that I believe in 2008, you would be at straight-time capacity of 3 million in North America. Do I remember that correctly? Straight-time manned capacity? Hello?

Yes. Micki Maynard – New York Times : So last year in North America, you did about 3.1 million units, including Canada, at 17% market share just in North America. You are saying your market share will drop to 14% but the broader market is expected to drop this year. How will you maintain 3 million units if you are saying market share is going down and the market itself is expected to go down?

I am not sure I am recognizing the numbers that you are quoting there right now. Maybe we could take that offline, because I see different numbers. Micki Maynard – New York Times : Okay. Well, then let me ask one other question. There have been some media reports here in Detroit in the last couple of days that Ford is considering paying bonuses to some executives, either retention bonuses or just regular bonuses for 2006. I wonder if that actually is under consideration and if that is something that you plan to do?

Yes, it is under consideration as part of our overall compensation plan to make sure that we are paying competitive wages and benefits, but we have not made any final decisions yet. Micki Maynard – New York Times : When do you expect to do that?

I think over the next couple of months.

Your next question comes from Bryce Hoffman - Detroit News. Bryce Hoffman - Detroit News : Hi, guys. I want to follow up on Micki's question actually. You talked, Alan, about how much progress you have made with the UAW on these competitive operating agreements and how you applaud their spirit of cooperation. We understand though that they have kind of put that on hold, talks on the COAs right now, because of this bonus issue. Can you comment on that?

We continue to work with them on the COAs, but we had a couple of them that did slow up for a little bit, but our commitment is to keep working it together.

And just one follow-up question, just a point of clarification, Alan. You said that you are cautiously optimistic that it is going to be a big part of our negotiations this year, in response to the question about health care. Were you talking about UAW health care benefits?

No, I was thinking of it more in a general sense than health care. All the wages and benefits, including the healthcare, we need to continually be addressing it.

Thanks a lot.

And just to add to your question, there are so many different ways that we are getting at this that you're seeing a lot of companies work together with their employees to get at it. So we don't have a one specific improvement plan that we want. We want to be open to all thoughts about how to improve our competitiveness and that is going to be our attitude going in.

Your next question comes from Tom Krisher - Associated Press. Tom Krisher - Associated Press: Hi, guys. Of the $33.9 billion in automotive sector cash, you borrowed $12 billion of that. Is that correct?

In December, that's correct. Tom Krisher - Associated Press: And then how much of that $33.9 billion is obligated to pension and other fixed costs? How much can you actually tap into of that?

Well, we can access nearly all of it very quickly. None of it is directly attached in that sense. Let me try to come back to Micki Maynard's question.

Micki, are you still on?

No, she can’t… unfortunate. Let me try to answer the question. We are looking at capacity in North America, and that is capacity that is in place to service the market in the U.S. and Canada and in Mexico. We have some exports on the U.S. that go outside, but count as U.S. production. We have some sales, mainly in Mexico, that are imported from outside North America. We did have total sales in North America of about $3.1 million. We expect that to decline this year by 100,000 units or so, consistent with the market share going down. Production isn't going down quite as much because the production changed at the end of last year. It's got the dealer inventory reduction in it, so it gets a little hard to track, but we do expect to have our capacity by the end of this year quite closely aligned to our actual sales. That is our manned capacity. Now we are not going to get our installed capacity down until later on. But we do expect to be quite close on the manned capacity at the end of '08. Actually very close at the end of '07 and then have the installed capacity brought in line with sales by the end of the decade.

Your next question comes from Amy Wilson - Automotive News. Amy Wilson - Automotive News: Good morning. Alan, I wanted to ask about how you are thinking about your management team and where it is right now. Obviously you have set that out as a crucial part of the plan and you have brought in one of your former colleagues from Boeing on the HR side. Do you have any other plans to bring in any other help, or do you think your management team is exactly where it needs to be? Alan Mulally: I have no other plans at this time. I think that just to comment on Jerry, Jerry is a terrific leader and a lot of experience in HR and negotiations and Joe Laymon had a chance to meet Jerry when he was recruiting me and came to appreciate him as much as I do. I thought it was terrific that Joe wanted to utilize his talents when he retired from Boeing. They’ve got a great relationship and as I've said before, Joe is doing a great job. He is our HR leader, I think it is terrific that he is tapping into Jerry's expertise going forward here. On the Ford leadership team, I am really, really pleased with the direction in which we are headed. The announcement we made a few weeks ago where we streamlined the organization and we really added even more focus to each of the markets in each of the regions around the world is being very well-received. Mark clearly is doing a great job in the Americas. And then having Lewis Booth in Europe and PAG reporting to me directly now, and also John Parker who manages Asia-Pacific and Africa and the Mazda relationship reporting to me directly, it is the…

Your next question comes from Bill Koenig - Bloomberg News. Bill Koenig - Bloomberg News : As long as we are asking about reports -- and I won't be proud, it was in the Detroit News yesterday -- there was a story about a $715 million loss at Jaguar last year and it is projected to be lower, but still substantial this year. First of all, are those figures correct? Second, do you have the time to be dealing with a problem as thorny as Jaguar while you've got an even thornier North American problem? Alan Mulally: I missed your second question. Bill Koenig - Bloomberg News : Okay. The second question is do you have the time and resources to deal with Jaguar, which has been going on for 18 years, at the same time you've got an even thornier, bigger problem in North America? Alan Mulally: Okay. I understand. On the first question, the numbers are wrong and I would also like to comment that we are really pleased with the progress that Ford of Europe and Jaguar and Land Rover and Volvo are making. We have invested in their new product line-up, it is being very well-received. They are making tremendous progress, all of those brands, on their quality and productivity. So we are very pleased with their progress. On the second, I think my thought on that is that they have very, very solid plans in place and it is not taking a lot of extra effort to get a plan. The real effort is helping them and just paying attention to everybody staying on the plan and executing on the plan that they have, which is a very good business plan going forward. Clearly, each of the businesses is in the same place right now. North America has a very good plan, South America, Asia-Pacific and Europe. So the real thing right now is that everybody stays laser-focused on implementing this plan, making sure we have got all of the risks identified, mitigating those risks and in continuing to look for more opportunities to keep improving our plan year after year.

Your next question comes from John Stoll - Dow Jones. John Stoll - Dow Jones: I would like to follow up on the question earlier about bonuses. I guess given the financial condition and the numbers and also the ongoing costs, your drive to cut costs on a plant by plant level, it was sort of surprising to hear that you are considering bonuses. Is this a shift? Because Ford hasn't published or provided bonuses recently and I'm wondering if this is a shift in mentality on how to compensate workers, incentivize workers and how that should be received by the UAW after the COAs? Alan Mulally: Sure. I would be glad to share a thought about that with you. The most important thing in our consideration for all of our employees is that we are paying or compensating our employees competitively. The executives, the management, all of our employees, that we are competitive; because, at the end of the day, everything about our performance going forward is going to be dependent on having a skilled and motivated team going forward. A big part of that is that we are competitive with the other businesses that we are competing against. The issue about the leadership and the bonuses, it really fits into that because as you know, more of the compensation of the senior leaders is tied to performance on accomplishing the plan. We use the word bonus, but it really is an inherent key piece of their compensation and we want to make sure that it is competitive and that we pay them for the performance that they are achieving. Now we are in a tough situation right now and we are in a turnaround situation and we need the absolute best, skilled and motivated team in all of…

Your next question comes from Sarah Webster - Detroit Free Press. Sarah Webster - Detroit Free Press: Good morning. Alan, you said that you feel that your capital expenditures on product development is competitive, but GM just recently upped their spend to $8 billion, Toyota spends $10 billion, and you are still at $7 billion. Given the fact that you have conceded that your system for product development is less efficient than it needs to be, it seems like Ford should be investing at least some of the money that you have obtained through your financing to upping your expenditure. If you could address that one more time? Alan Mulally: Sure, Sarah. Good morning to you. I think the way we are thinking about it is that as we focus our portfolio and we focus our family in each of the brands that allow us to get a more investment per vehicle and then to have that consistency of purpose that we've talked about, I think will allow us to get a lot more value for our investment dollar. But I would like to say again I have looked through the entire product development plan not only on the capital that we mentioned -- which is the $7 billion that Don mentioned earlier -- but also through all of the engineering investment that we make that helps create the products that between the engineering investment and the capital investment which covers the production, that there is not other money that I would like to invest. I think we have got the right amount of money and we are getting clearer and clearer on the focus on our product development strategy. With every product development, every new car, it is also going to be part of a more flexible, enhanced, higher-quality…

Your next question comes from Jeff McCracken - Wall Street Journal. Jeff McCracken - Wall Street Journal: Good morning, everybody. On slide 32, you talked about industry net pricing and you expect it to be lower in 2007. My question is why it would be lower, if you were going to be getting out of the rental car business in '07? Wouldn't it theoretically get better in '07 if you have or are exiting the rental car business? I wonder if perhaps any of that relates to the F-Series or the F-150 and the cost pressures that would come with a new Silverado and a new Tundra.

Let me try and answer that, Jeff, because what slide 32 was trying to show -- and maybe we weren't clear enough -- is the U.S. industry net pricing. So what we were trying to say there is that we expect the pricing environment overall in the U.S. to be down, as it has been the last few years. You can see that on Bureau of Labor Statistics reporting. What we are saying is that we expect these volumes we project to be slightly down from last year, mainly in the first half, and that is consistent with the overall level of economic activity in the country, gasoline prices and so on and within that, we expect that pricing environment to continue to be tough. That was the competitive setting there. We weren't really saying anything about our own performance within that tough pricing environment. The point you make is correct; that we do expect a benefit from having reduced our participation in the daily rental business. Some of it we will see right away and in terms of less incentives going out to sell cars to the daily rental companies and then later on, we expect improvement in residual values. So that slide there was really talking about a total industry setting where we have our own plan internally -- Mark does -- to try and improve our margins on the pricing side. Jeff McCracken - Wall Street Journal: So do you think --? Raj Modi: The last question please. Jeff McCracken - Wall Street Journal: What was that?

Jeff, did you have another one? Jeff McCracken - Wall Street Journal: I guess my follow-up was just what is your projection for Ford net pricing? Is it to be lower in '07 or flat or up?

I think our projection, Jeff, very simply is about flat to maybe slightly down and again, as Don was mentioning, I think there's a number of things that are working in our favor, as Don mentioned, exiting the Taurus and the Freestar business, which is not a particularly good business for us in terms from a pricing standpoint. But at the same time, when you look at the flow of products we have coming -- the Edge, the MKX, very importantly the Super Duty, which again is 40% of our F-Series sales -- plus the fact that it shouldn't be lost on us that we had some of our competitors taking very significant actions in the fourth quarter of last year to address their inventory problems. When you look at our position going into 2007, we're very comfortable with our inventory position. We're about 66 days supply, down 10 days from last year and down 20% in total volume. So we are going to have to see how the market goes, but I think we're very prepared both from an inventory and a new product introduction standpoint. We will watch the market and if it is more competitive, then we will take actions on the cost side to offset that. Raj Modi: Cindy, we have time for one more question, please.

Thank you, sir. The last question will come from John Murphy - Merrill Lynch.

Good morning, guys. I got in under the wire here. Alan Mulally: Hi John -- a lot of pressure on you.

If I could sneak maybe two quick ones in here. First, the cash burn for the quarter was much better than we expected and I think was generally expected. I don't know if I am reading too much into it here, but does that mean the restructuring actions may be moving slower than expected? Or also maybe conversely, that you guys might be more efficient with your cash than had previously been expected and this $17 billion burn through 2009 might be an aggressive assumption? Second Alan, specifically on your management philosophy here, there has been a lot of expectation for a long time that you would come out with your new plan, maybe the new Way, Way Forward plan and I was just wondering if you think what is out there already with the Way Forward plan is sufficient for milestones and a roadmap publicly and maybe even internally? And then with your Thursday meetings that you just continue to chip away and maybe go faster in those milestones that are out there already, or do you need to come out with a new plan above and beyond the Way Forward? Alan Mulally: We will have Don go first and then I will finish up.

I will try and answer your question on the cash flow in the fourth quarter. I don't know what you were projecting, but our cash outflow in the fourth quarter was a little bit better than we were expecting and that was mainly from cost performance. I'd say that it doesn't indicate anything at all that our restructuring is behind. In fact, our restructuring is on plan or maybe a little ahead of plan in the sense that we have got more people that took the industry-wide buyout and we are on plan with ACH. So from my perspective, the plant idlings are on schedule. We are on schedule or a little ahead of schedule with the restructuring. We did a little bit better on operating cash flow -- just a little -- and I would say right now, we want to stick with the projection we made for '07 to '09 cash outflow that we used as a part of the financing that we raised in December. Alan Mulally: Very good, Don. On your other question about the plan and going forward, I think the way I would characterize that is that we have a very solid plan in place that we think deals with our business realities and returns it to profitability and has the investment needed in the near term to create a product line that people really do want and value in our new world, and a new production system that delivers even higher quality and productivity for a viable Ford going forward. Now clearly, Mark and the North America team really led this, dealing with the reality when they looked at the world with really clear glasses in 2004 and 2005 and started with the Way Forward plan. I think that they also took a…