Edgar Filing: FORD MOTOR CO

F 12.31.2011- 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K



(Mark One)
R	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the fiscal year ended December 31, 2011

	or

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from __________ to __________

	Commission file number 1-3950

Ford Motor Company

(Exact name of Registrant as specified in its charter)



Delaware	38-0549190
(State of incorporation)	(I.R.S. Employer Identification No.)

One American Road, Dearborn, Michigan	48126
(Address of principal executive offices)	(Zip Code)

313-322-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered*
Common Stock, par value $.01 per share		New York Stock Exchange
7.50% Notes Due June 10, 2043		New York Stock Exchange

__________

* In addition, shares of Common Stock of Ford are listed on certain stock exchanges in Europe.

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes R No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No R

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer R Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No R

As of June 30, 2011, Ford had outstanding 3,728,794,458 shares of Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($13.79 per share), the aggregate market value of such Common Stock was $51,420,075,576. Although there is no quoted market for our Class B Stock, shares of Class B Stock may be converted at any time into an equal number of shares of Common Stock for the purpose of effecting the sale or other disposition of such shares of Common Stock. The shares of Common Stock and Class B Stock outstanding at June 30, 2011 included shares owned by persons who may be deemed to be "affiliates" of Ford. We do not believe, however, that any such person should be considered to be an affiliate. For information concerning ownership of outstanding Common Stock and Class B Stock, see the Proxy Statement for Ford's Annual Meeting of Stockholders currently scheduled to be held on May 10, 2012 (our "Proxy Statement"), which is incorporated by reference under various Items of this Report as indicated below.

As of February 13, 2012, Ford had outstanding 3,729,894,765 shares of Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($12.54 per share), the aggregate market value of such Common Stock was $46,772,880,353.

DOCUMENTS INCORPORATED BY REFERENCE



Document		Where Incorporated
Proxy Statement*		Part III (Items 10, 11, 12, 13 and 14)

__________


*	As stated under various Items of this Report, only certain specified portions of such document are incorporated by reference in this Report.

Exhibit Index begins on page 90.

FORD MOTOR COMPANY

ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2011



	Table of Contents	Page
	Part I
Item 1	Business	1
	Overview	2
	Automotive Sector	3
	Financial Services Sector	10
	Governmental Standards	11
	Employment Data	16
	Engineering, Research, and Development	16
Item 1A	Risk Factors	17
Item 1B	Unresolved Staff Comments	23
Item 2	Properties	23
Item 3	Legal Proceedings	25
Item 4	Mine Safety Disclosures	27
Item 4A	Executive Officers of Ford	28
	Part II
Item 5	Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	29
Item 6	Selected Financial Data	30
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
	Overview	31
	Results of Operations	40
	Automotive Sector Results of Operations	42
	Financial Services Sector Results of Operations	55
	Liquidity and Capital Resources	59
	Outlook	73
	Critical Accounting Estimates	77
	Accounting Standards Issued But Not Yet Adopted	82
	Aggregate Contractual Obligations	83
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	84
	Overview	84
	Automotive Market and Counterparty Risk	84
	Ford Credit Market Risk	86
Item 8	Financial Statements and Supplementary Data	87
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	87
Item 9A	Controls and Procedures	88
Item 9B	Other Information	88
	Part III
Item 10	Directors, Executive Officers of Ford and Corporate Governance	89
Item 11	Executive Compensation	89
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	89
Item 13	Certain Relationships and Related Transactions, and Director Independence	89
Item 14	Principal Accounting Fees and Services	89




	Table of Contents
	(continued)
	Part IV
Item 15	Exhibits and Financial Statement Schedules	90
	Exhibit Index	90
	Signatures	96
	Ford Motor Company and Subsidiaries Financial Statements
	Report of Independent Registered Public Accounting Firm	FS-1
	Consolidated Statement of Operations	FS-2
	Sector Statement of Operations	FS-3
	Consolidated Balance Sheet	FS-4
	Sector Balance Sheet	FS-5
	Consolidated Statement of Cash Flows	FS-6
	Sector Statement of Cash Flows	FS-7
	Consolidated Statement of Equity	FS-8
	Notes to the Financial Statements	FS-9
	Schedule II -- Valuation and Qualifying Accounts	FSS-1

PART I.

ITEM 1. Business

Ford Motor Company (referred to herein as "Ford", the "Company", "we", "our" or "us") was incorporated in Delaware in 1919. We acquired the business of a Michigan company, also known as Ford Motor Company, which had been incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. We are one of the world’s largest producers of cars and trucks. We and our subsidiaries also engage in other businesses, including financing vehicles.

In addition to the information about Ford and our subsidiaries contained in this Annual Report on Form 10-K for the year ended December 31, 2011 ("2011 Form 10-K Report" or "Report"), extensive information about our Company can be found at www.corporate.ford.com, including information about our management team, our brands and products, and our corporate governance principles.

The corporate governance information on our website includes our Corporate Governance Principles, Code of Ethics for Senior Financial Personnel, Code of Ethics for the Board of Directors, Standards of Corporate Conduct for all employees, and the Charters for each of the Committees of our Board of Directors. In addition, any amendments to our Code of Ethics or waivers granted to our directors and executive officers will be posted in this area of our website. All of these documents may be accessed by going to our corporate website and clicking on "Our Company," then "Corporate Governance," and then "Corporate Governance Policies," or may be obtained free of charge by writing to our Shareholder Relations Department, Ford Motor Company, One American Road, P.O. Box 1899, Dearborn, Michigan 48126-1899.

In addition, all of our recent periodic report filings with the Securities and Exchange Commission ("SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website. This includes recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those Reports. Recent Section 16 filings made with the SEC by the Company or any of our executive officers or directors with respect to our Common Stock also are made available free of charge through our website. We post each of these documents on our website as soon as reasonably practicable after it is electronically filed with the SEC.

To access our SEC reports or amendments or the Section 16 filings, go to our corporate website and click "Our Company," then "Investor Relations," then "Reports and SEC Filings," which links to a list of reports filed with the SEC. Our reports filed with the SEC may also be found on the SEC's website at www.sec.gov.

The foregoing information regarding our website and its content is for convenience only and not deemed to be incorporated by reference into this Report nor filed with the SEC.

ITEM 1. Business (continued)

OVERVIEW

Segments. We review and present our business results in two sectors: Automotive and Financial Services. Within these sectors, our business is divided into reportable segments based on the organizational structure that we use to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure.

The reportable segments within our Automotive and Financial Services sectors at December 31, 2011 were as described in the table below:



Business Sector	Reportable Segments (a)	Description

Automotive:	Ford North America	Primarily includes the sale of Ford- and Lincoln-brand vehicles and related service parts in North America (the United States, Canada and Mexico), together with the associated costs to develop, manufacture, distribute and service these vehicles and parts. (b)
	Ford South America	Primarily includes the sale of Ford-brand vehicles and related service parts in South America, together with the associated costs to develop, manufacture, distribute and service these vehicles and parts.
	Ford Europe	Primarily includes the sale of Ford-brand vehicles and related service parts in Europe, Turkey and Russia, together with the associated costs to develop, manufacture, distribute and service these vehicles and parts.
	Ford Asia Pacific Africa	Primarily includes the sale of Ford-brand vehicles and related service parts in the Asia Pacific region and South Africa, together with the associated costs to develop, manufacture, distribute and service these vehicles and parts.
Financial Services:	Ford Motor Credit Company	Primarily includes vehicle-related financing, leasing, and insurance.
	Other Financial Services	Includes a variety of businesses including holding companies and real estate.

__________


(a)	We have experienced a number of changes to our reportable segments in recent years, including the following:


▪	We discontinued the Mercury brand as of the end of 2010.


▪	We sold our Volvo operations on August 2, 2010.

▪

During the fourth quarter of 2008, we sold a portion of our equity in Mazda Motor Corporation ("Mazda"), reducing our ownership percentage from approximately 33.4% at the time of sale to about 11% ownership shortly thereafter. Through a subsequent sale in the fourth quarter of 2010, we further reduced our ownership to about 3.5%. Beginning with the fourth quarter of 2008, we have accounted for our interest in Mazda as a marketable security (instead of as an operating segment).


▪	We sold our Jaguar Land Rover operations on June 2, 2008.


▪	We sold Aston Martin on May 31, 2007.


(b)	For periods prior to January 1, 2009, this segment also included the sale of Mazda6 vehicles produced by our then-consolidated affiliate AutoAlliance International, Inc. ("AAI").

We provide financial information (such as revenue, income, and assets) for each business sector and reportable segment in three areas of this Report: (1) "Item 6. Selected Financial Data;" (2) "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" ("Item 7"); and (3) Note 27 of the Notes to the Financial Statements located at the end of this Report. Financial information relating to certain geographic areas is included in Note 28 of the Notes to the Financial Statements.

ITEM 1. Business (continued)

AUTOMOTIVE SECTOR

General

Our vehicle brands are Ford and Lincoln. In 2011, we sold approximately 5,695,000 vehicles at wholesale throughout the world. See Item 7 for discussion of our calculation of wholesale unit volumes.

Substantially all of our cars, trucks and parts are marketed through retail dealers in North America, and through distributors and dealers (collectively, "dealerships") outside of North America, the substantial majority of which are independently owned. At December 31, 2011, the approximate number of dealerships worldwide distributing our vehicle brands was as follows:



Brand	Number of Dealerships at December 31, 2011
Ford	10,653
Ford-Lincoln (combined)	907
Lincoln	230
Total	11,790

In addition to the products we sell to our dealerships for retail sale, we also sell cars and trucks to our dealerships for sale to fleet customers, including commercial fleet customers, daily rental car companies, and governments. We do not depend on any single customer or small group of customers to the extent that the loss of such customer or group of customers would have a material adverse effect on our business.

Through our dealer network and other channels, we provide retail customers with a wide range of after-sale vehicle services and products, including maintenance and light repair, heavy repair, collision repair, vehicle accessories and extended service contracts. In North America, we market these products and services under several brands, including Ford Service, Lincoln Service, Ford Custom Accessories^™, Ford and Lincoln Extended Service Plans, and Motorcraft^SM.

The worldwide automotive industry, Ford included, is affected significantly by general economic conditions, among other factors, over which we have little control. This is especially so because vehicles are durable goods, which provide consumers latitude in determining whether and when to replace an existing vehicle. The decision whether to purchase a vehicle may be affected significantly by slowing economic growth, geopolitical events, and other factors (including the cost of purchasing and operating cars and trucks and the availability and cost of credit and fuel). As we recently have seen in the United States and Europe, in particular, the number of cars and trucks sold may vary substantially from year to year. Further, the automotive industry is a highly competitive business that has a wide and growing variety of product offerings from a growing number of manufacturers.

Our wholesale unit volumes vary with the level of total industry demand and our share of that industry demand. In the short term, our wholesale unit volumes also are influenced by the level of dealer inventory. Our share is influenced by how our products are perceived in comparison to those offered by other manufacturers based on many factors, including price, quality, styling, reliability, safety, fuel efficiency, functionality, and reputation. Our share also is affected by the timing and frequency of new model introductions. Our ability to satisfy changing consumer preferences with respect to type or size of vehicle, as well as design and performance characteristics, impacts our sales and earnings significantly.

As with other manufacturers, the profitability of our business is affected by many factors, including:


▪	Wholesale unit volumes


▪	Margin of profit on each vehicle sold - which in turn is affected by many factors, such as:


•	Market factors - volume and mix of vehicles and options sold, and net pricing (reflecting, among other factors, incentive programs)


•	Costs of components and raw materials necessary for production of vehicles


•	Costs for customer warranty claims and additional service actions


•	Costs for safety, emissions and fuel economy technology and equipment


▪	A high proportion of relatively fixed structural costs, so that small changes in wholesale unit volumes can significantly affect overall profitability

ITEM 1. Business (continued)

Our industry continues to face a very competitive pricing environment, driven in part by industry excess capacity, particularly in mature markets such as North America and Europe. For the past several decades, manufacturers typically have given price discounts and other marketing incentives to maintain market share and production levels. A discussion of our strategies to compete in this pricing environment is set forth in the "Overview" section in Item 7.

Competitive Position. The worldwide automotive industry consists of many producers, with no single dominant producer. Certain manufacturers, however, account for the major percentage of total sales within particular countries, especially their countries of origin. Key competitors with global presence include Fiat-Chrysler, General Motors Company, Honda Motor Company, Hyundai-Kia Automotive Group, PSA Peugeot Citroen, Renault-Nissan B.V., Suzuki Motor Corporation, Toyota Motor Corporation, and Volkswagen AG Group.

Seasonality. We generally record the sale of a vehicle (and recognize revenue) when it is produced and shipped or delivered to our customer (i.e., the dealership). See the "Overview" section in Item 7 for additional discussion of revenue recognition practices.

We manage our vehicle production schedule based on a number of factors, including retail sales (i.e., units sold by our dealerships to their customers at retail) and dealer stock levels (i.e., the number of units held in inventory by our dealerships for sale to their customers). In the past, we have experienced some seasonal fluctuation in the business, with production in many markets tending to be higher in the first half of the year to meet demand in the spring and summer (typically the strongest sales months of the year). Third quarter production has tended to be the lowest. As a result, operating results for the third quarter typically have been less favorable than other quarters.

Raw Materials. We purchase a wide variety of raw materials from numerous suppliers around the world for use in production of our vehicles. These materials include ferrous metals (e.g., steel and iron castings), non-ferrous metals (e.g., aluminum), precious metals (e.g., palladium), energy (e.g., natural gas), and plastics/resins (e.g., polypropylene). We believe that we have adequate supplies or sources of availability of raw materials necessary to meet our needs. There always are risks and uncertainties with respect to the supply of raw materials, however, which could impact availability in sufficient quantities to meet our needs. See the "Overview" section of Item 7 for a discussion of commodity and energy price trends, and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" ("Item 7A") for a discussion of commodity price risks.

Backlog Orders. We generally produce and ship our products on average within approximately 20 days after an order is deemed to become firm. Therefore, no significant amount of backlog orders accumulates during any period.

Intellectual Property. We own or hold licenses to use numerous patents, copyrights, and trademarks on a global basis. Our policy is to protect our competitive position by, among other methods, filing U.S. and international patent applications to protect technology and improvements that we consider important to the development of our business. We have generated a large number of patents, and expect this portfolio to continue to grow as we actively pursue additional technological innovation. We currently have approximately 17,660 active patents and pending patent applications globally, with an average age for patents in our active patent portfolio of just under five and a half years. In addition to this intellectual property, we also rely on our proprietary knowledge and ongoing technological innovation to develop and maintain our competitive position. Although we believe that these patents, patent applications, and know-how, in the aggregate, are important to the conduct of our business, and we obtain licenses to use certain intellectual property owned by others, none is individually considered material to our business. We also own numerous trademarks and service marks that contribute to the identity and recognition of our Company and its products and services globally. Certain of these marks are integral to the conduct of our business, a loss of any of which could have a material adverse effect on our business.

Warranty Coverage and Additional Service Actions. We currently provide warranties on vehicles we sell. Warranties are offered for specific periods of time and/or mileage, and vary depending upon the type of product, usage of the product and the geographic location of its sale. In compliance with regulatory requirements, we also provide emissions-defects and emissions-performance warranty coverage. Pursuant to these warranties, we will repair, replace, or adjust all parts on a vehicle that are defective in factory-supplied materials or workmanship during the specified warranty period. In addition to the costs associated with the warranty coverage provided on our vehicles, we also incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions.

For additional information regarding warranty and related costs, see "Critical Accounting Estimates" in Item 7 and Note 30 of the Notes to the Financial Statements.

ITEM 1. Business (continued)

Industry Sales Volume

Industry sales volume is an internal estimate based on publicly-available data collected from various government, private, and public sources around the globe. The following chart shows industry sales volume for the last five years for certain key markets in each region, and for the total we track within each of our Ford North America, Ford South America, Ford Europe, and Ford Asia Pacific Africa regions (in millions of units):



	Industry Sales Volume (a)
	2011	2010	2009	2008	2007
United States	13.0	11.8	10.6	13.5	16.5
Canada	1.6	1.6	1.5	1.7	1.7
Mexico	0.9	0.8	0.8	1.1	1.1
Ford North America	15.5	14.2	12.9	16.3	19.3

Brazil	3.6	3.5	3.1	2.8	2.5
Argentina	0.8	0.7	0.5	0.6	0.6
Ford South America (b)	5.4	5.0	4.2	4.3	4.1

Britain	2.2	2.3	2.2	2.5	2.8
Germany	3.5	3.2	4.0	3.4	3.5
Ford Europe (c)	15.3	15.3	15.9	16.6	18.0

Turkey	0.9	0.8	0.6	0.5	0.6
Russia	2.7	2.0	1.5	3.1	2.7

China	18.4	18.3	14.1	9.9	9.1
India	3.3	3.1	2.3	2.0	2.0
Australia	1.0	1.0	0.9	1.0	1.1
South Africa	0.5	0.4	0.4	0.5	0.6
ASEAN (d)	2.6	2.4	1.9	2.0	1.8
Ford Asia Pacific Africa (e)	30.4	30.7	24.5	20.9	20.4

______________


(a)	Throughout this Report, industry sales volume and wholesale unit volumes include sales of medium and heavy trucks.


(b)	Ford South America industry sales volume and market share are based, in part, on estimated vehicle registrations for the six markets we track in the region (i.e., Argentina, Brazil, Chile, Colombia, Ecuador, and Venezuela).

(c)

Ford Europe industry sales volume and market share are based, in part, on estimated vehicle registrations for the 19 markets we track (i.e., Austria, Belgium, Britain, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and Switzerland); sales of Ford-brand vehicles in Turkey and Russia by our unconsolidated affiliates Ford Otomotiv Sanayi Anonim Sirketi ("Ford Otosan") and Ford Sollers Netherlands B.V. ("FordSollers"), respectively, contribute to Ford Europe's wholesale unit volumes, but are not reflected in industry sales volume or market share for the region.


(d)	ASEAN includes Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

(e)

Ford Asia Pacific Africa industry sales volume and market share are based, in part, on estimated vehicle sales for the 12 markets we track (i.e., Australia, China, Japan, India, Indonesia, Malaysia, New Zealand, Philippines, South Africa, Taiwan, Thailand, and Vietnam); market share data for 2008 to the present include local-brand vehicles produced by our Chinese joint venture Jiangling Motors Corporation, Ltd. ("JMC").

ITEM 1. Business (continued)

Ford North America

The following tables show our wholesales and market share by market in North America:



	Wholesales (a)
	(in thousands)
	2011	2010	2009	2008	2007
United States	2,224	1,947	1,563	1,825	2,363
Canada	273	278	223	198	243
Mexico	88	88	80	134	140
Ford North America (b)	2,686	2,413	1,927	2,329	2,890

______________

(a) Throughout this Report, wholesale unit volumes include all Ford-badged units (whether produced by Ford or by an unconsolidated affiliate), units manufactured by Ford that are sold to other manufacturers and units distributed for other manufacturers, and JMC-brand vehicles. Revenue from certain vehicles in wholesale unit volumes (specifically, Ford-badged vehicles produced and distributed by our unconsolidated affiliates, and JMC-brand vehicles) are not included in our revenue. Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option, as well as other sales of finished vehicles for which the recognition of revenue is deferred (e.g., consignments), are included in wholesale unit volumes.


(b)	Throughout this Report, regional wholesale unit volumes include wholesales to various export markets.



	Market Share (a)
	2011		2010		2009		2008		2007
United States	16.5	%	16.4	%	15.3	%	14.2	%	14.6	%
Canada	17.1	%	16.9	%	15.2	%	12.6	%	13.3	%
Mexico	9.4	%	10.5	%	11.8	%	12.1	%	13.3	%

______________

(a) Throughout this Report, market share represents reported retail sales of our brands as a percent of total industry sales volume in the relevant market (as opposed to wholesale unit volumes reflecting sales directly by us to our customers, generally our dealers); market share data also exclude Volvo.

United States. The competitive environment in the United States continues to intensify as foreign manufacturers increase imports to the United States and production capacity in North America. Overall, we see a long-term industry trend toward smaller and more fuel-efficient vehicles, and we believe the long-term trend of growth in the U.S. small car segment remains intact. The small car segment has increased its share from 14% in 2004 to 20.6% in 2009 - one of the most significant segment shifts in the industry. Although small cars dipped to 18.8% of industry in 2010, the segment grew again in 2011, increasing to 19.1% of total industry. At the same time, our sales of small cars at Ford were up 25% in 2011, giving us 10% share of the small car segment and more than a full percentage point increase compared to 2010 - our best share in the U.S. small car segment since 2003.

Small car-based utilities were another of the fastest growing U.S. industry segments in 2011, increasing to 13.7% of industry compared with 8.2% in 2004. Our Escape small utility was the best-selling utility in America last year, and 2011 was our best sales year for Escape since the vehicle was introduced in 2000. The mid-size utility vehicle segment represents the largest segment within the utility category. This segment continues to grow, albeit at a slower pace than the small utility segment. In 2011, the mid-size utility segment represented 14.5% of total vehicles sales. This compares to 13% in 2004. The majority of the segment is now represented by uni-body platforms, as opposed to body-on-frame platforms commonly in use 10 years ago. Sales for our all-new uni-body Explorer were up 124% year-over-year for 2011.

Although the full-size pickup segment also has begun to grow in share of total industry again, we believe we will need to see a continued and sustainable recovery in the construction industry (including new housing starts) in order to see the full-size pickup segment increase significantly as a percentage of total industry sales. With the full-size pickup segment at 10.7% of industry in 2009, 11.6% in 2010, and unchanged in 2011, we believe the segment is still in its initial phase of a cyclical recovery. The peak year for full-size pickup trucks was 2004, with 14.7% of total industry. Within the full-size pickup truck segment, our F-Series retains strong market leadership.

Our strong U.S. vehicle sales in 2011 reflect our balanced portfolio of fuel-efficient vehicles. Our results marked the third consecutive year-over-year that our overall U.S. market share has increased, with the improvement driven in large measure by our new Fiesta small car and Escape and Explorer utilities.

The data above include both retail and fleet sales. Fleet includes sales to commercial fleet customers, daily rental car companies, and governments; in general, fleet sales tend to be less profitable than retail sales. In 2011, fleet sales were 32% of our total sales; the majority was with commercial and government customers, which are more profitable than daily rentals. In 2011, our daily rental business was 12% of total sales, lower than the industry average of 13%. As the leading manufacturer of commercial vehicles in the United States, commercial buyers are increasingly choosing Ford cars and crossovers because of our improved resale values, and continue to favor Ford trucks and vans.

ITEM 1. Business (continued)

Canada. Industry sales volume in Canada grew 3% in 2011 compared with the prior year. Within that total, truck sales increased by 1.6 percentage points to 56% of overall industry vehicle sales, while car sales decreased to 44% of industry sales volume. Our sales growth in the market earned Ford Canada the sales leadership title for the second year in a row. Strong sales in 2011 primarily reflected increased sales of cars, which gained 14% over the prior year, in addition to our already strong truck sales performance. In 2011, Ford Canada earned segment leadership with Fusion, Mustang, Escape, Explorer, Ranger, F-150, and Super Duty.

Mexico. Industry sales volume in Mexico grew 10% during 2011. Segmentation shifts in the industry away from trucks and utilities and toward cars contributed to our share decline. Fleet sales also decreased in the last year as a result of government and commercial segment cutbacks. Our plans for near-term market share growth include new model launches - including in the fastest-growing segment, small cars.

Ford South America

As indicated, we track industry sales and market share for six markets in South America - Argentina, Brazil, Chile, Colombia, Ecuador, and Venezuela. Ford South America's wholesales are more inclusive, tracking Ford-brand vehicles in every market in the region. Brazil and Argentina are our highest-volume South American markets. In particular, Brazil's economy and demographics, with growing per capita income, low vehicle ownership rates, and a young population, have allowed its automotive market to more than double since 2002. These favorable factors are expected to continue to contribute to growth in vehicle sales in Brazil. The following tables show our wholesales and market share in the largest markets and in total:



	Wholesales
	(in thousands)
	2011	2010	2009	2008	2007
Brazil	346	358	336	297	258
Argentina	105	85	66	77	77
Ford South America	506	489	443	435	438



	Market Share
	2011		2010		2009		2008		2007
Brazil	9.8	%	10.4	%	10.3	%	10.0	%	10.8	%
Argentina	12.9		12.4		13.3		12.4		13.7
Ford South America	9.3		9.8		10.2		9.7		10.7

The competition in Brazil is intensifying, as a number of automotive manufacturers are bringing online substantial capacity increases in the market. The intensifying competitive environment is putting pressure on industry net pricing; our plans to leverage fully our One Ford plan, including the introduction of an all-new lineup of global products over the next two years, beginning in the second half of 2012, should benefit us in this market.

Ford Europe

The automotive industry in Europe is intensely competitive, and expected to intensify further as Japanese and Korean manufacturers increase production capacity in the region and manufacturers of premium brands (e.g., BMW, Mercedes-Benz and Audi) continue to broaden product offerings.

As indicated, we track industry and market share in Europe for the following 19 markets: Austria, Belgium, Britain, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and Switzerland. Ford Europe's wholesales are more inclusive, tracking Ford-brand vehicles in every market in the region, including those wholesales in Turkey and Russia from our unconsolidated affiliates, Ford Otosan and FordSollers.



	Wholesales
	(in thousands)
	2011	2010	2009	2008	2007
Ford Europe	1,602	1,573	1,568	1,820	1,918



	Market Share
	2011		2010		2009		2008	2007
Ford Europe	8.3	%	8.4	%	9.1	%	8.6%	8.5	%

ITEM 1. Business (continued)

Within the 19 markets we track, Britain and Germany are our highest-volume markets. Any change in the British or German market has a significant effect on the results of Ford Europe. The following tables show our wholesales and market share for Britain and Germany (which are included within the 19 markets data above):



	Wholesales
	(in thousands)
	2011	2010	2009	2008	2007
Britain	342	341	354	415	414
Germany	250	216	286	250	230



	Market Share
	2011		2010		2009	2008		2007
Britain	15.0	%	15.0	%	16.8%	16.4	%	15.9	%
Germany	7.4		6.9		7.6	7.0		6.7

Britain. Industry sales volume in Britain began to decline in 2008 with the global financial crisis, and since 2003 has remained in the 2.2 million - 2.3 million unit range (compared with 2.8 million units in 2007).

Our market share remained steady in 2011 compared with the prior year, with Ford continuing as the market share leader in the Britain. Unusually high market share in 2009 was driven by the launch of the popular Ford Ka and Ford Fiesta small cars, coincident with the implementation of a government vehicle scrappage program designed to stimulate vehicle sales.

Germany. With 3.5 million new vehicle registrations in 2011, Germany's industry sales volume grew by 9.6% compared with the prior year. Germany was the only major market in Europe to experience an increase in industry sales volume in 2011, and remains the largest vehicle market in the European Union. In 2011, both passenger car and commercial vehicle industry sales recovered along with the growing economy.

In 2011, Ford was the fastest growing manufacturer (with vehicle unit sales up 17.6% compared with the prior year), and increased market share by more than half of a percentage point primarily driven by the success of new Ford Focus, C-MAX, and S-MAX, as well as record sales of Ford Transit vehicles.

Turkey and Russia. Although not included in the results for the 19 European markets discussed above, Turkey and Russia also contribute to our Ford Europe segment results. The following tables show our wholesales and market share for Turkey and Russia for the last five years:



	Wholesales
	(in thousands)
	2011	2010	2009	2008	2007
Turkey	140	130	79	78	100
Russia	124	93	74	183	180



	Market Share
	2011		2010		2009		2008		2007
Turkey	15.8	%	15.8	%	15.1	%	14.7	%	16.8	%
Russia	4.3		4.6		5.5		6.1		6.5

Turkey. Industry growth slowed in 2008 as a result of the global financial crisis. Beginning in 2009, industry vehicle sales accelerated due to government incentives put in place, with significant continuous increase in the last two years (from nearly 800,000 vehicle unit sales in 2010 to just over 900,000 vehicle unit sales in 2011). As shown above, our 2011 wholesales surpassed pre-crisis levels, and our market share has increased in recent years.

Russia. Following a 50% contraction in 2009 as a result of the impact of the global financial crisis reaching Russia, industry sales volume has returned almost to pre-crisis levels, with industry sales volume of 2.7 million units in 2011. Russia is the second-largest market for vehicle sales in Europe, and is expected to become the largest over the next several years. Our sales grew by 30% in 2011, led by strong sales of the new Focus and Transit. As previously reported, our Russian operations became part of the new FordSollers joint venture which began operations in October 2011. We expect this joint venture to contribute to our ability to continue to grow profitably in this rapidly expanding market.

ITEM 1. Business (continued)

Motor Vehicle Distribution in Europe. In 2009, the European Commission abolished the 2002 block exemption law that had been specific to vehicle distribution agreements, and adopted instead a new generic regulation applying to all manufacturer-distributor relationships. The new law represents a marked improvement for manufacturers, and we have concluded new agreements with our dealers reflecting most of the improvements that will enter into effect on June 1, 2013.

Ford Asia Pacific Africa

Ford Asia Pacific Africa industry sales and market share data focus on our 12 major markets in the region; wholesales are more inclusive, tracking every market in the region. Of the markets we track in this region, ASEAN, Australia, China, India, and South Africa are our principal markets.

Small cars account for 60% of Asia Pacific Africa industry sales volume, and are anticipated to continue to benefit from government policy. We anticipate that the ongoing relaxation of import restrictions (including duty reductions) will continue to intensify competition in the region, particularly around small, ultra-affordable passenger cars. The highly successful launches of our all-new Figo and Fiesta demonstrate our ability to successfully compete in key growth segments. We anticipate further success with the introduction of the all-new EcoSport later in 2012.

The following tables show our wholesales and market share for key markets and in total for the last five years:



	Wholesales
	(in thousands)
	2011	2010	2009	2008	2007
China	519	483	345	251	203
India	96	84	30	29	39
Australia	83	104	92	102	108
South Africa	49	45	38	51	61
ASEAN	74	51	38	36	39
Ford Asia Pacific Africa	901	838	604	532	535



	Market Share
	2011		2010		2009		2008		2007
China	2.7	%	2.5	%	2.5	%	2.6	%	2.1	%
India	2.9		2.6		1.3		1.4		1.9
Australia	9.0		9.2		10.3		10.3		10.3
South Africa	8.4		7.7		7.6		6.9		7.6
ASEAN	2.7		1.5		1.6		1.5		2.0
Ford Asia Pacific Africa	2.7		2.4		2.3		2.3		2.3

China and India are burgeoning markets that are expected to continue to experience rapid and substantial growth in the next ten years, driving new economic growth in the Asia Pacific Africa region. Accordingly, we have increased and are planning to increase further our dealer networks and manufacturing capacity in the region. We are building seven new plants - four in China, two in India, and one in Thailand - as part of our plan to have production capacity of 2.3 million vehicles in the region by mid-decade. These new state-of-the-art highly-flexible manufacturing facilities will help us reach the goal of increasing worldwide sales to about 8 million vehicles per year by mid-decade.

In China, we also are significantly expanding our research and engineering center in Nanjing as part of our plan to accelerate our growth in China and in the Asia Pacific Region.

ITEM 1. Business (continued)

FINANCIAL SERVICES SECTOR

Ford Motor Credit Company LLC

Our wholly-owned subsidiary Ford Motor Credit Company LLC ("Ford Credit") offers a wide variety of automotive financing products to and through automotive dealers throughout the world. The predominant share of Ford Credit’s business consists of financing our vehicles and supporting our dealers. Ford Credit earns its revenue primarily from:


•	Payments made under retail installment sale and lease contracts that it originates and purchases;


•	Interest supplements and other support payments from us and our subsidiaries on special-rate financing programs; and


•	Payments made under wholesale and other dealer loan financing programs.

As a result of these financing activities, Ford Credit has a large portfolio of finance receivables and leases which it classifies into two segments – "consumer" and "non-consumer." Finance receivables and leases in the consumer segment relate to products offered to individuals and to businesses that finance the acquisition of vehicles from dealers for personal and commercial use. The financing products include retail installment sale contracts for new and used vehicles, and leases for new vehicles to retail customers, government entities, daily rental car companies, and fleet customers. Finance receivables in the non-consumer segment relate primarily to products offered to automotive dealers, including loans to finance the purchase of vehicle inventory (i.e., wholesale financing), for improvements to dealership facilities, for working capital, and for purchase of dealership real estate. Ford Credit also purchases receivables generated by us and our subsidiaries, primarily in connection with the sale of parts and accessories.

Ford Credit does business in the United States and Canada through regional business centers. Outside of the United States, FCE Bank plc ("FCE") is Ford Credit's largest operation; Europe is FCE's largest market. Within Europe, FCE's largest and most profitable markets are Germany and the United Kingdom. About 70% of FCE's finance and lease receivables are from FCE's customers and Ford dealers in Germany, the United Kingdom, and France; about 17% are from FCE's customers and Ford dealers in Italy and Spain; and about 2% are from FCE's customers and Ford dealers in Greece, Ireland, and Portugal. FCE, through its Worldwide Trade Financing division, also provides financing to dealers in countries where typically we have no established local presence.

Ford Credit's share of retail financing for new Ford and Lincoln vehicles sold by dealers in the United States and new Ford vehicles sold by dealers in Europe, as well as its share of wholesale financing for new Ford and Lincoln vehicles acquired by dealers in the United States (excluding fleet) and new Ford vehicles acquired by dealers in Europe were:



United States	Years Ended December 31,
Financing share – Ford and Lincoln	2011		2010		2009
Retail installment and lease	36	%	32	%	29	%
Wholesale	80		81		79
Europe
Financing share – Ford
Retail installment and lease	29	%	26	%	28	%
Wholesale	99		99		99

See Item 7 and Notes 7, 8, and 9 of the Notes to the Financial Statements for a detailed discussion of Ford Credit's receivables, credit losses, allowance for credit losses, loss-to-receivables ratios, funding sources, and funding strategies. See Item 7A for a discussion of how Ford Credit manages its financial market risks.

We routinely sponsor special retail and lease incentives to dealers' customers who choose to finance or lease our vehicles from Ford Credit. In order to compensate Ford Credit for the lower interest or lease rates offered to the retail customer, we pay the discounted value of the incentive directly to Ford Credit when it originates the retail finance or lease contract. These programs increase Ford Credit's financing volume and share of financing sales of our vehicles. See Note 2 of the Notes to the Financial Statements for information about our accounting for these programs.

In November 2008, we entered into an Amended and Restated Support Agreement with Ford Credit, pursuant to which, if its managed leverage for a calendar quarter were to be higher than 11.5 to 1 (as reported in its most recent periodic report), Ford Credit could require us to make or cause to be made a capital contribution to it in an amount sufficient to have caused such managed leverage to have been 11.5 to 1. No capital contributions have been made pursuant to this agreement. In addition, Ford Credit has an agreement to maintain FCE's net worth in excess of $500 million; no payments have been made pursuant to that agreement in 2001 - 2011.

ITEM 1. Business (continued)

GOVERNMENTAL STANDARDS

Many governmental standards and regulations relating to safety, fuel economy, emissions control, noise control, vehicle recycling, substances of concern, vehicle damage, and theft prevention are applicable to new motor vehicles, engines, and equipment manufactured for sale in the United States, Europe, and elsewhere. In addition, manufacturing and other automotive assembly facilities in the United States, Europe, and elsewhere are subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances. The most significant of the standards and regulations affecting us are discussed below:

Mobile Source Emissions Control

U.S. Requirements - Federal Emissions Standards. The federal Clean Air Act imposes stringent limits on the amount of regulated pollutants that lawfully may be emitted by new vehicles and engines produced for sale in the United States. The current ("Tier 2") emissions regulations promulgated by the U.S. Environmental Protection Agency ("EPA") set standards for cars and light trucks. Tier 2 emissions standards also establish durability requirements for emissions components to 120,000 miles or 150,000 miles (depending on the specific standards to which the vehicle is certified).

EPA also has stringent emissions standards and requirements for EPA-defined "heavy-duty" vehicles and engines (generally, those vehicles with a gross vehicle weight rating of 8,500 pounds to 14,000 pounds gross vehicle weight). In order to meet the standards for heavy-duty diesel trucks, Ford and most other manufacturers use selective catalytic reduction ("SCR") systems, which require periodic customer maintenance. EPA has issued guidance regarding maintenance intervals and warning systems that must be used to alert motorists to the need for maintenance of SCR systems. One heavy-duty engine manufacturer that does not rely on SCR technology has filed two lawsuits in federal court challenging: 1) EPA's decision to certify vehicles with SCR systems, and 2) the appropriateness of EPA's certification test procedures for heavy-duty vehicles. The former suit was dismissed at the district court level but may be appealed; no ruling has been issued yet in the latter suit. The same manufacturer also has filed suit in California state court challenging the certification of SCR-equipped vehicles by the California Air Resources Board ("CARB"). The Engine Manufacturers Association, a trade association to which we belong, has intervened in that litigation on the side of CARB; the suit currently is in the discovery phase. If the courts direct EPA or CARB to reconsider certification of vehicles with SCR systems, or if agencies impose additional restrictions on our ability to use SCR technology, it could have an adverse effect on our ability to produce and sell heavy-duty diesel vehicles.

U.S. Requirements - California and Other State Emissions Standards. Pursuant to the Clean Air Act, California may seek a waiver from EPA to establish unique vehicle emissions control standards; each new or modified proposal requires a new waiver of preemption from EPA. California has received a waiver from EPA to establish its own unique emissions control standards for certain regulated pollutants. New vehicles and engines sold in California must be certified by CARB; CARB's current low-emission vehicle ("LEV II") emissions standards treat most light-duty trucks the same as passenger cars, and require both types of vehicles to meet stringent new emissions requirements. Like EPA's Tier 2 emissions standards, CARB's LEV II emissions standards present a difficult engineering challenge. The California program includes requirements for manufacturers to produce and deliver for sale zero-emission vehicles ("ZEVs") that emit no regulated pollutants. The current ZEV regulations allow certain advanced-technology vehicles (e.g., hybrid electric vehicles or natural gas vehicles) with extremely low tailpipe emissions to qualify for ZEV credits. The rules also give some ZEV credits for so-called "partial zero-emission vehicles" ("PZEVs"), which can be internal combustion engine vehicles certified to very low tailpipe emissions and zero evaporative emissions. The current rules require increasing volumes of battery-electric and other advanced technology vehicles with each passing model year. We plan to comply with the ZEV regulations through the sale of a variety of battery-electric vehicles, hybrid vehicles, plug-in hybrid vehicles, and PZEVs. Our compliance plan entails significant costs, and has a variety of inherent risks, including potential component shortages that may make it difficult to produce vehicles in sufficient quantities.

The Clean Air Act also permits other states that do not meet National Ambient Air Quality Standards to adopt California's motor vehicle emissions standards no later than two years before the affected model year. In addition to California, fourteen states, primarily located in the Northeast and Northwest, have adopted the California standards for current and/or future model years (and eleven of these states also have adopted the ZEV requirements). These states, together with California, account for more than 30% of our current U.S. light-duty vehicle sales volume. It is possible that additional states may adopt the California standards in the future. The adoption of California standards by other states presents challenges for manufacturers, including: 1) managing fleet average emissions standards and ZEV mandate requirements on a state-by-state basis, which presents difficulties from the standpoint of planning and distribution; 2) market acceptance of some vehicles required by the ZEV program varies from state to state, depending on weather and other factors; and 3) states adopting the California program have not adopted California's clean fuel regulations, which may impair the ability of vehicles in other states to meet California's in-use standards.

ITEM 1. Business (continued)

CARB is in the process of revising its LEV and ZEV regulations. In December 2011, CARB issued its proposed "LEV III" rules, setting standards for emissions of smog-forming pollutants (as well as greenhouse gases ("GHGs"), which are discussed in the "Motor Vehicle Fuel Economy" section below). The proposed new standards would begin phasing in with the 2015 model year and extend through the 2025 model year. The major elements of the LEV III program are new, more stringent tailpipe and evaporative emissions standards for light- and medium-duty vehicles; extended durability requirements; and changes to the certification test procedures, requiring manufacturers to certify vehicles on fuel containing 10% ethanol. CARB also issued proposed new ZEV regulations covering model years 2015 - 2025. The amendments for model years 2015 - 2017 represent relatively modest changes to existing requirements. For model years 2018 - 2025, CARB is proposing to require substantial annual increases in the production and sale of battery-electric, fuel cell, and plug-in hybrid vehicles. By the 2025 model year, approximately 15% of a manufacturer's total California sales volume will need to be made up of such vehicles.

Compliance with the revised LEV III and ZEV regulations likely will require costly actions that could have a substantial adverse effect on our sales volume and profits. The LEV III proposal presents a significant engineering challenge for manufacturers, who will need to design new emissions after-treatment systems in order to comply. The proposed ZEV rules pose an even greater obstacle, requiring intensive planning efforts and large capital investments in order to deliver the required number of advanced-technology vehicles. We are concerned that the market and infrastructure in California may not support the large volumes of advanced-technology vehicles that manufacturers will be required to produce, particularly in the 2018 - 2025 model years. We also are concerned about potential enforcement of the proposed ZEV mandate in other states that have adopted California's ZEV program, where the existence of a market for such vehicles is even less certain. We are working with CARB directly and through the Alliance of Automobile Manufacturers ("Alliance") in an effort to promote regulations that are reasonable and technologically feasible, and we have submitted comments on the proposed LEV III and ZEV rules. The industry also is negotiating with states that have adopted California's ZEV rules in an effort to reach agreement on an alternative ZEV program for those states.

European Requirements. European Union ("EU") directives and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU. Stringent new emissions standards ("Stage IV Standards") were applied to new passenger car certifications beginning in 2005, and to new registrations beginning in 2006. The comparable light commercial truck Stage IV Standards went into effect for new certifications beginning in 2006, and for new registrations beginning in 2007. This directive on emissions also introduced on-board diagnostic requirements, more stringent evaporative emissions requirements, and in-service compliance testing and recall provisions for emissions-related defects that occur in the first five years or 100,000 kilometers of vehicle life. Failure of in-service compliance tests could lead to vehicle recalls with substantial costs for related inspections or repairs.

Stage V emissions requirements began for vehicle registrations starting in January 2011; Stage VI requirements will apply from September 2014. Stage V particulate standards drove the deployment of particulate filters across diesels, and Stage VI further tightens the standard for oxides of nitrogen. This will drive the need for additional diesel exhaust after-treatment which will add cost and potentially impact the diesel CO₂ advantage. These technology requirements add cost and further erode the fuel economy cost/benefit advantage of diesel vehicles.

Vehicles equipped with SCR systems require a driver inducement and warning system for maintenance or repair. The Stage V/VI emission legislation also mandated internet provision of all repair information (not just emissions-related), and provision of information to diagnostic tool manufacturers.

Other National Requirements. Many countries, in an effort to address air quality concerns, are adopting previous versions of European or United Nations Economic Commission for Europe ("UN-ECE") mobile source emissions regulations. Some countries have adopted more advanced regulations based on the most recent version of European or U.S. regulations; for example, China plans to adopt the most recent European standards to be implemented starting from 2012 in large cities. Korea and Taiwan have adopted very stringent U.S.-based standards for gasoline vehicles, and European-based standards for diesel vehicles. Because fleet average requirements do not apply, some vehicle emissions control systems may have to be redesigned to meet the requirements in these markets. Furthermore, not all of these countries have adopted appropriate fuel quality standards to accompany the stringent emissions standards adopted. This could lead to compliance problems, particularly if on-board diagnostic or in-use surveillance requirements are implemented. Japan has unique standards and test procedures, and implemented more stringent standards beginning in 2009. This may require unique emissions control systems be designed for the Japanese market. Canadian criteria emissions regulations are aligned with U.S. federal Tier 2 requirements.

ITEM 1. Business (continued)

In South America, Brazil, Argentina and Chile are introducing more stringent emissions standards. Brazil approved Euro V emissions and on-board diagnostic standards for heavy trucks starting in 2012; more stringent light vehicle limits come into effect in 2012. Argentina has approved Euro V standards for 2012. Chile approved a new decontamination plan for its metropolitan region with more stringent emission requirements based on U.S. or EU regulations.

Motor Vehicle Fuel Economy

There are ever-increasing demands from regulators, public interest groups, and consumers for improvements in motor vehicle fuel economy, for a variety of reasons including energy security and reduced GHG emissions. Our ability to comply with a given set of fuel economy standards (including GHG emissions standards, which are functionally equivalent to fuel economy standards) depends on a variety of factors, including: 1) prevailing economic conditions, including fluctuations in fuel prices; 2) alignment of standards with actual consumer demand for vehicles; and 3) adequate lead time to make necessary product changes. Consumer demand for vehicles tends to fluctuate based on a variety of external factors. Consumers are more likely to pay for vehicles with fuel-efficient technologies (such as hybrid-electric vehicles) when the economy is robust, and when fuel prices are relatively high. When the economy is in recession and/or fuel prices are relatively low, many consumers may put off new vehicle purchases altogether, and among those who do purchase vehicles, demand for higher-cost fuel technologies is not likely to be strong. If consumers demand vehicles that are relatively large, high-performance, and/or feature-laden, while regulatory standards require production of vehicles that are smaller and more economical, the mismatch of supply and demand would have an adverse effect on both regulatory compliance and our profitability. Moreover, if regulatory requirements call for rapid, substantial increases in fleet average fuel economy (or decreases in fleet average GHG emissions), we may not have adequate resources and time to make major product changes across most or all of our vehicle fleet (assuming the necessary technology can be developed).

U.S. Requirements - Light Duty Vehicles. Federal law requires that light-duty vehicles meet minimum corporate average fuel economy ("CAFE") standards set by the National Highway Traffic Safety Administration ("NHTSA"). A manufacturer is subject to potentially substantial civil penalties if it fails to meet the CAFE standard in any model year, after taking into account all available credits for the preceding three model years and expected credits for the five succeeding model years. The law requires NHTSA to promulgate and enforce separate CAFE standards applicable to each manufacturer's fleet of domestic passenger cars, imported passenger cars, and light trucks, respectively.

California also has asserted the right to regulate motor vehicle GHG emissions, and a 2007 U.S. Supreme Court decision paved the way for EPA to regulate motor vehicle GHG emissions under the Clean Air Act. The potential for three sets of overlapping and conflicting regulations led to the establishment of the federal "One National Program," pursuant to which EPA and NHTSA have promulgated regulations establishing a harmonized national program of CAFE and GHG regulations for light-duty vehicles for the 2012 - 2016 model years. California has amended its regulations to provide that manufacturers who comply with "One National Program" regulations will be deemed to comply with the California GHG regulations. The 2012 - 2016 federal GHG and fuel economy standards are very challenging. They require new light-duty vehicles to ramp up to an industry average fuel economy of approximately 35.5 mpg by the 2016 model year, which amounts to the steepest rate of increase in fuel economy standards since the inception of the CAFE program. CARB has adopted modifications to its GHG regulations consistent with these standards.

We believe that we will be able to comply with the harmonized federal CAFE/GHG standards for the 2012 - 2016 model years, as a result of aggressive actions to improve fuel economy that we built into our cycle plan, and through a variety of flexible compliance mechanisms. In contrast, we had projected that we would be unable to comply with the state GHG standards that had been in place for the 2012 - 2016 period without undertaking costly product restrictions in some states. Key differences that enable us to project compliance with the national program include: 1) One National Program standards, although very stringent, do not ramp up as steeply as the state standards they are replacing; and 2) One National Program allows us to determine compliance based on nationwide sales rather than state-by-state sales. The ability to average across the nation eliminates state-to-state sales variability and is a critical element for us and for the automotive industry. The 2012-2016 model year One National Program rules currently are being challenged in federal court by entities concerned about the ramifications of these rules on stationary source regulation. The automotive industry has intervened in the litigation in support of maintaining the existing One National Program rules.

In November 2011, EPA and NHTSA jointly issued proposed rules to extend the One National Program framework through the 2025 model year. The proposed rules would require manufacturers to achieve, across the industry, a light-duty fleet average fuel economy of approximately 45 miles per gallon ("mpg") by the 2021 model year, and approximately 54.5 mpg by the 2025 model year, assuming all of the CO₂ emissions reductions are achieved through the deployment of fuel economy technology. This represents a reduction of roughly 5% per year in CO₂ emissions from passenger cars for the 2017 - 2025 model years. For light trucks, the proposed standards represent a reduction in CO₂emissions of about 3.5% per year for model years 2017 - 2021, and about 5% per year for model years 2022 - 2025. Each manufacturer's

ITEM 1. Business (continued)

specific task would depend on the mix of vehicles it sells. The proposed rules include the opportunity for manufacturers to earn credits for technologies that achieve real-world CO₂ reductions, and fuel economy improvements that are not captured by EPA fuel economy test procedures. Manufacturers also can earn credits for GHG reductions not specifically tied to fuel economy, such as improvements in air conditioning systems. The proposal includes a mid-term evaluation process under which EPA and NHTSA will re-evaluate their standards for model year 2022 - 2025 by 2018 in order to ensure that those standards are feasible and optimal in light of intervening events. Ford and the Alliance have filed extensive comments on the proposal. EPA and NHTSA are expected to issue final rules in 2012, and shortly thereafter CARB is expected to modify its regulations to provide that compliance with the federal program satisfies compliance with California's requirements for the 2017 - 2025 model years.

While the proposed rules are challenging, we believe they are feasible in light of our product plans and projected market conditions. It is important that the final rules retain the key elements of the proposal, such as the compliance flexibilities and the mid-term review evaluation process. Provided the final rules are acceptable, we believe it is in our interest to continue with One National Program rather than re-engage in disputes with California (and other states that use the California standards) over the right to enforce state-specific GHG standards.

If the final rules promulgated by EPA and NHTSA deviate materially from the proposed rules, or if the agencies are forced to modify the rules as a result of litigation, it still is possible that the One National Program framework may not continue in the 2017 - 2025 model years. Under this scenario, there likely would be a return to conflicting state and federal regimes for regulating fuel economy and GHG emissions beginning with the 2017 model year. Compliance with both regimes would at best add enormous complexity to our planning processes, and at worst could be virtually impossible. If either of these regulatory regimes impose and enforce extreme fuel economy or GHG standards, we likely would be forced to take various actions that could have substantial adverse effects on our sales volume and profits. Such actions likely would include restricting offerings of selected engines and popular options; increasing market support programs for our most fuel-efficient cars and light trucks; and ultimately curtailing the production and sale of certain vehicles such as high-performance cars, utilities, and/or full-size light trucks, in order to maintain compliance. These actions might need to occur on a state-by-state basis, in response to the rules adopted by California and other states, or at the national level if the federal standards are excessively stringent.

U.S. Requirements - Heavy-Duty Vehicles. In 2011, EPA and NHTSA promulgated final regulations imposing, for the first time, GHG and fuel economy standards on heavy-duty vehicles (generally, vehicles over 8,500 pounds gross vehicle weight rating). In our case, the standards primarily affect our heavy-duty pickup trucks and vans, plus vocational vehicles such as shuttle buses and delivery trucks. These standards will be challenging, but we believe we will be able to comply. EPA and NHTSA are expected to issue a new round of standards for these vehicles covering the 2019 model year and beyond; as the standards increase in stringency, it may become more difficult to comply while continuing to offer a full lineup of heavy-duty trucks. The 2014 - 2018 heavy-duty GHG rules are being challenged in federal court by entities other than truck and engine manufacturers. Remand or rejection by the court could have a substantial adverse impact on our future production and sale of heavy-duty vehicles, depending on the court's specific order and agencies' response.

European Requirements. In December 2008, the EU approved regulation of passenger car CO₂ emissions beginning in 2012 which limits the industry fleet average to a maximum of 130 g/km, using a sliding scale based on vehicle weight. This regulation provides different targets for each manufacturer based on its respective average vehicle weight for its fleet of vehicles. Limited credits are available for CO₂ off-cycle actions ("eco-innovations"), certain alternative fuels, and vehicles with CO₂ emissions below 50 g/km. A penalty system will apply for manufacturers failing to meet targets, with fees ranging from €5 to €95 per vehicle per g/km shortfall in the years 2012 - 2018, and €95 per g/km shortfall beginning in 2019. Manufacturers will be permitted to use a pooling agreement between wholly-owned brands to share the burden. Further pooling agreements between different manufacturers also are possible, although it is not clear that these will be of much practical benefit under the regulations. For 2020, an industry target of 95 g/km has been set. This target will be further detailed in a review in 2013. Other non-EU European countries are likely to follow with similar regulations. For example, Switzerland is introducing similar rules, phasing-in beginning in July 2012 with the same targets, although the industry average emission target is significantly higher. We face the risk of advance premium payment requirements based on past performance beginning in the second half of 2012.

In separate legislation, so-called "complementary measures" have been mandated (for example, tire-related and gearshift indicator requirements), and more mandates are expected. These include requirements related to fuel economy indicators, and more-efficient low-CO₂ mobile air conditioning systems. The EU Commission, Council and Parliament are close to formally approving a target for commercial light-duty vehicles to be at an industry average of 175 g/km (with phase-in from 2014 - 2017), and 147 g/km in 2020. This regulation also would provide different targets for each manufacturer based on its respective average vehicle weight in its fleet of vehicles. The final mass and CO₂ requirements for so-called "multi-stage vehicles" (e.g., our Transit chassis cabs) are fully allocated to the base manufacturer (e.g., Ford)

ITEM 1. Business (continued)

so that the base manufacturer is fully responsible for the CO₂ performance of the final up-fitted vehicles. The EU proposal also includes a penalty system, "super-credits" for vehicles below 50 g/km, and limited credits for CO₂ off-cycle actions ("eco-innovations"), pooling, etc., similar to the passenger car CO₂ regulation.

Some European countries have implemented or are considering other initiatives for reducing CO₂ vehicle emissions, including fiscal measures and CO₂ labeling. For example, the United Kingdom, France, Germany, Spain, Portugal, and the Netherlands, among others, have introduced taxation based on CO₂ emissions. The EU CO₂ requirements are likely to trigger further measures.

Other National Requirements. The Canadian federal government has regulated vehicle GHG emissions under the Canadian Environmental Protection Act, beginning with the 2011 model year. The standards track the new U.S. CAFE standards for the 2011 model year and U.S. EPA GHG regulations for the 2012 - 2016 model years. The Canadian federal government now has published a notice of intent to maintain alignment with U.S. EPA vehicle GHG standards for the 2017 - 2025 model years. In December 2009, Quebec also enacted province-specific regulations setting fleet average GHG standards for the 2010 - 2016 model years effective January 2010. Now that the Canadian federal regulation is in place, the Quebec government has amended the Quebec regulation to recognize equivalency with the federal standards; reporting of Quebec fleet performance still is required.

Some Asian countries (such as China, Japan, India, South Korea, and Taiwan) also have adopted fuel efficiency or labeling targets. For example, Japan has fuel efficiency targets for 2015 that are more stringent than the 2010 targets, with incentives for early adoption. China implemented second-stage fuel economy targets from 2008, and is working on the third stage for 2012 phase-in. All of these fuel efficiency targets will impact the cost of vehicle technology in the future.

In South America, Brazil introduced a voluntary vehicle energy-efficiency labeling program, indicating fuel consumption rates for light vehicles with spark ignition engine. Chile also will adopt a fuel-consumption and emissions-labeling system. In general, fuel efficiency targets may impact the cost of technology of our models in the future.

Motor Vehicle Safety

U.S. Requirements. The National Traffic and Motor Vehicle Safety Act of 1966 (the "Safety Act") regulates vehicles and vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable vehicle safety standards established by NHTSA. Meeting or exceeding many safety standards is costly, in part because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it determines the vehicles do not comply with a safety standard. Should we or NHTSA determine that either a safety defect or noncompliance exists with respect to any of our vehicles, the cost of such recall campaigns could be substantial.

Foreign Requirements. The EU and many countries around the world have established vehicle safety standards and regulations, and are likely to adopt additional or more stringent requirements in the future. The European General Safety Regulation introduced UN-ECE regulations, which will be will be required for the European Type Approval process. EU regulators also are focusing on active safety features such as lane departure warning systems, electronic stability control, and automatic brake assist. These technologies have been implemented in Europe with final regulation and implementing measures having become available in late 2011. Globally, governments generally have been adopting EU-based regulations with minor variations to address local concerns. The difference between North American and EU-based regulations adds complexity and costs to the development of global platform vehicles; we continue to support efforts to harmonize regulations to reduce vehicle design complexity while providing a common level of safety performance. New recall requirements in Asia Pacific Africa also may add substantial costs and complexity to our global recall practice.

Pollution Control Costs

During the period 2012 through 2016, we expect to spend about $160 million on our facilities in the Americas and Europe to comply with stationary source air and water pollution and hazardous waste control standards that are now in effect or are scheduled to come into effect during this period. Of this total, we currently estimate we will spend between $30 million and $35 million in each of 2012 and 2013, respectively. Specific environmental expenses are difficult to isolate because expenditures may be made for more than one purpose, making precise classification difficult.

ITEM 1. Business (continued)

EMPLOYMENT DATA

The approximate number of individuals employed by us and entities that we consolidated as of December 31, 2011 and 2010 was as follows (in thousands):



	2011	2010
Automotive
Ford North America	75	75
Ford South America	16	15
Ford Europe	47	49
Ford Asia Pacific Africa	19	18
Financial Services
Ford Credit	7	7
Total	164	164

While our overall employment remained steady, Ford Europe experienced reductions related largely to the transfer of Russian operations to our FordSollers unconsolidated joint venture, offset partially by increases in emerging markets to support increased production.

Substantially all of the hourly employees in our Automotive operations are represented by unions and covered by collective bargaining agreements. In the United States, approximately 99% of these unionized hourly employees in our Automotive sector are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW" or "United Auto Workers"). Approximately two percent of our U.S. salaried employees are represented by unions. Most hourly employees and many non-management salaried employees of our subsidiaries outside of the United States also are represented by unions.

In 2011, we entered into a new four-year collective bargaining agreement with the UAW. The agreement covers approximately 41,000 employees, and maintains our progress on improving competitiveness in the United States. Excluding profit-sharing, compensation-related terms - including lump-sum payments (in lieu of general wage increases and cost of living increases) and continuation of an entry-level wage structure - are expected to increase U.S. hourly labor costs by less than 1% annually over the four-year contract period. We also expect this increase will be more than offset by more flexible work rules that will allow us to increase manufacturing utilization and efficiency.

In 2011, we also negotiated new collective bargaining agreements with labor unions in Argentina, Brazil, France, Mexico, New Zealand, Russia, Taiwan, and Thailand.

In 2012, we will negotiate a new agreement in Canada with the National Automobile, Aerospace, Transportation and General Workers Union of Canada ("CAW"), as well as labor unions in Argentina, Australia, Brazil, Britain, France, Germany, Mexico, Romania, Taiwan and Turkey.

ENGINEERING, RESEARCH, AND DEVELOPMENT

We engage in engineering, research, and development primarily to improve the performance (including fuel efficiency), safety, and customer satisfaction of our products, and to develop new products. We maintain extensive engineering, research, and design centers for these purposes, including large centers in Dearborn, Michigan; Dunton, England; and Aachen and Merkenich, Germany. Most of our engineering, research, and development relates to our Automotive sector.

Engineering, research, and development expenses for 2011, 2010, and 2009 were $5.3 billion, $5 billion, and $4.7 billion, respectively (2009 data adjusted to reflect the impact of the accounting standard on consolidation of variable interest entities ("VIEs")).

ITEM 1A. Risk Factors

We have listed below (not necessarily in order of importance or probability of occurrence) the most significant risk factors applicable to us:

Decline in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geopolitical events, or other factors. In the fall of 2008, the global economy entered a financial crisis and severe recession, putting significant pressure on us and on the automotive industry generally. These economic conditions dramatically reduced automotive industry sales volume in the United States and Europe, in particular, and began to slow growth in other markets around the world. U.S. automotive industry sales volume declined from 16.5 million units in 2007 to 13.5 million units in 2008 and 10.6 million units in 2009, before rebounding slightly to 11.8 million units in 2010 and 13 million units in 2011. For the 19 markets we track in Europe, automotive industry sales volume declined from 18.1 million units in 2007 to 16.6 million units in 2008, 15.9 million units in 2009, and 15.3 million units in 2010 and 2011.

Because we, like other manufacturers, have a high proportion of relatively fixed structural costs, relatively small changes in industry sales volume can have a substantial effect on our cash flow and profitability. If industry vehicle sales were to decline to levels significantly below our planning assumption, particularly in the United States or Europe, due to financial crisis, recession, geopolitical events, or other factors, our financial condition and results of operations would be substantially adversely affected. For discussion of economic trends, see the "Overview" section of Item 7.

Decline in market share or failure to achieve growth. Our full-year U.S. market share declined each year between 1995 and 2008, declining from 18% to 14.2% from 2004 to 2008 alone. With our One Ford plan, we have seen U.S. market share gains in the last three years. To maintain competitive economies of scale and grow our global market share, however, we also must grow our market share in fast-growing newly-developed and emerging markets, particularly in Asia Pacific, as well as maintain or grow market share in mature markets. Our market share in certain growing markets, such as China, is substantially lower than it is in our mature markets. A decline in our market share in mature markets, whether due to capacity constraints, competitive pressures, or other factors, or failure to achieve growth in newly-developed or emerging markets, could have a substantial adverse effect on our financial condition and results of operations.

Lower-than-anticipated market acceptance of new or existing products. Although we conduct extensive market research before launching new or refreshed vehicles, many factors both within and outside our control affect the success of new or existing products in the marketplace. Offering highly desirable vehicles that customers want and value can mitigate the risks of increasing price competition and declining demand, but vehicles that are perceived to be less desirable (whether in terms of price, quality, styling, safety, overall value, fuel efficiency, or other attributes) can exacerbate these risks. For example, if a new model were to experience quality issues at the time of launch, the vehicle's perceived quality could be affected even after the issues had been corrected, resulting in lower sales volumes, market share, and profitability.

Market shift away from sales of larger, more profitable vehicles beyond our current planning assumption, particularly in the United States. A shift in consumer preferences away from larger, more profitable vehicles at levels beyond our current planning assumption could result in an immediate and substantial adverse impact on our financial condition and results of operations. For example, when gasoline prices in the United States spiked to more than $4.00 per gallon in 2008 and the construction industry suddenly slowed, consumer preferences quickly and dramatically shifted away from larger, more profitable vehicles and into smaller vehicles. We estimate that shifting consumer preferences across all vehicle segments adversely impacted our Automotive operating pre-tax earnings and cash flow in 2008 by about $1.3 billion. Although we now have a more balanced portfolio of small, medium, and large, cars, utilities, and trucks that generally are more fuel efficient and contribute higher margins than in 2008, and a lower cost structure, a shift in consumer preferences away from sales of larger, more profitable vehicles at levels greater than our current planning assumption - whether because of spiking fuel prices, a decline in the construction industry, government actions or incentives, or other reasons - still could have a substantial adverse effect on our financial condition and results of operations.

An increase in or continued volatility of fuel prices, or reduced availability of fuel. An increase in fuel prices, continued price volatility, or reduced availability of fuel, particularly in the United States, could result in further weakening of demand for relatively more-profitable large cars, utilities, and trucks, while increasing demand for relatively less-profitable small vehicles. Continuation or acceleration of such a trend beyond our current planning assumption, or volatility in demand across segments, could have a substantial adverse effect on our financial condition and results of operations.

Item 1A. Risk Factors (continued)

Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors. The global automotive industry is intensely competitive, with manufacturing capacity far exceeding current demand. According to the January 2012 report issued by IHS Automotive, the global automotive industry is estimated to have had excess capacity of 22 million units in 2011. Industry overcapacity has resulted in many manufacturers offering marketing incentives on vehicles in an attempt to maintain and grow market share; these incentives historically have included a combination of subsidized financing or leasing programs, price rebates, and other incentives. As a result, we are not necessarily able to set our prices to offset higher costs of marketing incentives, commodity or other cost increases, or the impact of adverse currency fluctuations, particularly in the U.S. and European markets. Continuation of or increased excess capacity could have a substantial adverse effect on our financial condition and results of operations.

Fluctuations in foreign currency exchange rates, commodity prices, and interest rates. As a resource-intensive manufacturing operation, we are exposed to a variety of market and asset risks, including the effects of changes in foreign currency exchange rates, commodity prices, and interest rates. These risks affect our Automotive and Financial Services sectors. We monitor and manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce potentially adverse effects on our business. Nevertheless, changes in currency exchange rates, commodity prices, and interest rates cannot always be predicted or hedged. In addition, because of intense price competition and our high level of fixed costs, we may not be able to address such changes even if they are foreseeable. As a result, substantial unfavorable changes in foreign currency exchange rates, commodity prices, or interest rates could have a substantial adverse effect on our financial condition and results of operations. See Item 7A for additional discussion of currency, commodity price, and interest rate risks.

Adverse effects on our operations resulting from economic, geopolitical, or other events. With the increasing interconnectedness of global economic and financial systems, a financial crisis, natural disaster, geopolitical crisis, or other significant event in one area of the world can have an immediate and devastating impact on markets around the world. For example, the financial crisis that began in the United States in 2008 quickly spread to other markets; natural disasters in Japan and Thailand during 2011 caused production interruptions and delays not just in Asia Pacific but other regions around the world; and episodes of increased geopolitical tensions or acts of terrorism in the Middle East or elsewhere have at times caused adverse reactions that may spread to economies around the globe.

In 2012, concerns persist regarding the debt burden of certain of the countries that have adopted the euro currency ("Euro area countries") and the ability of these countries to meet future financial obligations, as well as concerns regarding the overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances of individual Euro area countries. If a country within the Euro area were to default on its debt or withdraw from the euro currency, or - in a more extreme circumstance - the euro currency were to be dissolved entirely, the impact on markets around the world, and on Ford's global business, could be immediate and significant. Such a scenario - or the perception that such a development is imminent - could adversely affect the value of our euro-denominated assets and obligations. In addition, such a development could cause financial and capital markets within and outside Europe to constrict, thereby negatively impacting our ability to finance our business, and also could cause a substantial dip in consumer confidence and spending that could negatively impact sales of vehicles. Any one of these impacts could have a substantial adverse effect on our financial condition and results of operations.

In addition, we are pursuing growth opportunities in a number of newly-developed and emerging markets. These investments may expose us to heightened risks of economic, geopolitical, or other events, including governmental takeover (i.e., nationalization) of our manufacturing facilities or intellectual property, restrictive exchange controls, disruption of operations as a result of systemic political or economic instability, outbreak of war or expansion of hostilities, and acts of terrorism, each of which could have a substantial adverse effect on our financial condition and results of operations.

Economic distress of suppliers that may require us to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase our costs, affect our liquidity, or cause production constraints or disruptions. In recent years, the automotive industry supply base has experienced increased economic distress due to the sudden and substantial drop in industry sales volumes beginning in 2008. Dramatically lower industry sales volume made existing debt obligations and fixed cost levels difficult for many suppliers to manage, increasing pressure on the supply base. As a result, suppliers not only were less willing to reduce prices, but some requested direct or indirect price increases as well as new and shorter payment terms. At times, we have had to provide financial assistance to key suppliers to ensure an uninterrupted supply of materials and components. In addition, where suppliers have exited certain lines of business or closed facilities due to the economic downturn or other reasons, we generally experience additional costs associated with transitioning to new suppliers. Each of these factors could have a substantial adverse effect on our financial condition and results of operations.

Item 1A. Risk Factors (continued)

Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or other financial distress, production constraints or difficulties, or other factors). A work stoppage or other limitation on production could occur at Ford or supplier facilities for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements, or as a result of supplier financial distress or other production constraints or difficulties, or for other reasons. Recent examples of situations that have affected industry production to varying degrees include: supplier financial distress as production volumes decreased during the economic downturn in 2008 - 2009; capacity constraints as suppliers that restructured or downsized during the downturn work to satisfy growing industry volumes; short-term constraints on production as consumer preferences shift more fluidly across vehicle segments and features; and the impact on certain suppliers of natural disasters during 2011. As indicated, a work stoppage or other limitations on production at Ford or supplier facilities for any reason (including but not limited to labor disputes, natural or man-made disasters, tight credit markets or other financial distress, or production constraints or difficulties) could have a substantial adverse effect on our financial condition and results of operations.

Single-source supply of components or materials. Many components used in our vehicles are available only from a single supplier and cannot be re-sourced quickly or inexpensively to another supplier (due to long lead times, new contractual commitments that may be required by another supplier before ramping up to provide the components or materials, etc.). In addition to the general risks described above regarding interruption of supplies, which are exacerbated in the case of single-source suppliers, the exclusive supplier of a key component potentially could exert significant bargaining power over price, quality, warranty claims, or other terms relating to a component.

Labor or other constraints on our ability to maintain competitive cost structure. Substantially all of the hourly employees in our Automotive operations in the United States and Canada are represented by unions and covered by collective bargaining agreements. As indicated, we negotiated a new four-year agreement with the UAW in 2011, and will negotiate a new agreement with the CAW in 2012. Although we have negotiated transformational agreements in recent years, the agreements provide guaranteed wage and benefit levels throughout the contract term and some degree of employment security, subject to certain conditions. As a practical matter, these agreements may restrict our ability to close plants and divest businesses. A substantial number of our employees in other regions are represented by unions or government councils, and legislation or custom promoting retention of manufacturing or other employment in the state, country, or region may constrain as a practical matter our ability to sell or close manufacturing or other facilities.

Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition. We have qualified defined benefit retirement plans in the United States that cover our hourly and salaried employees. We also provide pension benefits to non-U.S. employees and retirees, primarily in Europe. In addition, we and certain of our subsidiaries sponsor plans to provide other postretirement benefits ("OPEB") for retired employees (primarily health care and life insurance benefits). See Note 17 of the Notes to the Financial Statements for more information about these plans. These benefit plans impose significant liabilities on us that are not fully funded and will require additional cash contributions, which could impair our liquidity.

Our U.S. defined benefit pension plans are subject to Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"). Under Title IV of ERISA, the Pension Benefit Guaranty Corporation ("PBGC") has the authority under certain circumstances or upon the occurrence of certain events to terminate an underfunded pension plan. One such circumstance is the occurrence of an event that unreasonably increases the risk of unreasonably large losses to the PBGC. Although we believe it is unlikely that the PBGC would terminate any of our plans, in the event that our U.S. pension plans were terminated at a time when the liabilities of the plans exceeded the assets of the plans we would incur a liability to the PBGC that could be equal to the entire amount of the underfunding.

At December 31, 2011, our U.S. and worldwide (including U.S.) defined benefit pension plans were underfunded by a total of $9.4 billion and $15.4 billion, respectively. If our cash flows and capital resources were insufficient to fund our pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, suspend dividend payments, seek additional capital, or restructure or refinance our indebtedness.

Worse-than-assumed economic and demographic experience for our postretirement benefit plans (e.g., discount rates or investment returns). The measurement of our obligations, costs, and liabilities associated with benefits pursuant to our postretirement benefit plans requires that we estimate the present value of projected future payments to all participants. We use many assumptions in calculating these estimates, including assumptions related to discount rates, investment returns on designated plan assets, and demographic experience (e.g., mortality and retirement rates). To the extent actual results are less favorable than our assumptions, there could be a substantial adverse impact on our financial condition and results of operations. For discussion of our assumptions, see "Critical Accounting Estimates" in Item 7 and Note 17 of the Notes to the Financial Statements.

Item 1A. Risk Factors (continued)

Restriction on use of tax attributes from tax law "ownership change." Section 382 of the U.S. Internal Revenue Code restricts the ability of a corporation that undergoes an ownership change to use its tax attributes, including net operating losses and tax credits ("Tax Attributes"). At December 31, 2011 we had Tax Attributes that would offset $15.6 billion of taxable income. For these purposes, an ownership change occurs if 5 percent shareholders of an issuer's outstanding common stock, collectively, increase their ownership percentage by more than 50 percentage points over a rolling three-year period. Restructuring actions we took in 2009, including our exchange of Ford Common Stock for convertible debt and our public issuance of additional Ford Common Stock, contributed significantly to the collective increase in ownership by 5 percent shareholders. At present, 5 percent shareholders may have collectively increased their ownership by about 20 percentage points. In September 2009, we implemented a tax benefit preservation plan (the "Plan") to reduce the risk of an ownership change under Section 382. Under the Plan, shares held by any person who acquires, without the approval of our Board of Directors, beneficial ownership of 4.99% or more of our outstanding Common Stock could be subject to significant dilution. Although the Plan presently is scheduled to expire in September 2012, we intend to extend the Plan.

The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, reputational damage, or increased warranty costs. Meeting or exceeding many government-mandated safety standards is costly and often technologically challenging, especially where standards may conflict with the need to reduce vehicle weight in order to meet government-mandated emissions and fuel-economy standards. Government safety standards also require manufacturers to remedy defects related to vehicle safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if it determines that the vehicles do not comply with a safety standard. Should we or government safety regulators determine that a safety or other defect or a noncompliance exists with respect to certain of our vehicles prior to the start of production, the launch of such vehicle could be delayed until such defect is remedied. The costs associated with any protracted delay in new model launches necessary to remedy such defects, or the cost of recall campaigns or warranty costs to remedy such defects in vehicles that have been sold, could be substantial. Further, adverse publicity surrounding actual or alleged safety-related or other defects could damage our reputation and adversely affect sales of our products.

Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or sales restrictions. The worldwide automotive industry is governed by a substantial amount of government regulation, which often differs by state, region, and country. Government regulation has arisen, and proposals for additional regulation are advanced, primarily out of concern for the environment (including concerns about the possibility of global climate change and its impact), vehicle safety, and energy independence. In addition, many governments regulate local product content and/or impose import requirements as a means of creating jobs, protecting domestic producers, and influencing the balance of payments. In recent years, we have made significant changes to our product cycle plan to improve the overall fuel economy of vehicles we produce, thereby reducing their GHG emissions. There are limits on our ability to achieve fuel economy improvements over a given timeframe, however, primarily relating to the cost and effectiveness of available technologies, consumer acceptance of new technologies and changes in vehicle mix, willingness of consumers to absorb the additional costs of new technologies, the appropriateness (or lack thereof) of certain technologies for use in particular vehicles, and the human, engineering and financial resources necessary to deploy new technologies across a wide range of products and powertrains in a short time. The cost to comply with existing government regulations is substantial, and future, additional regulations could have a substantial adverse impact on our financial condition and results of operations. For more discussion of the impact of such standards on our global business, see the "Governmental Standards" discussion in Item 1 above. In addition to governmental regulations, a number of influential organizations conduct public domain testing. Even as we continue to evolve our product line, aggressive changes in public domain testing requirements could have a negative influence on future sales.

Unusual or significant litigation, governmental investigations or adverse publicity arising out of alleged defects in our products, perceived environmental impacts, or otherwise. We spend substantial resources ensuring that we comply with governmental safety regulations, mobile and stationary source emissions regulations, and other standards. Compliance with governmental standards, however, does not necessarily prevent individual or class actions, which can entail significant cost and risk. In certain circumstances, courts may permit tort claims even where our vehicles comply with federal law and/or other applicable law. Furthermore, simply responding to actual or threatened litigation or government investigations of our compliance with regulatory standards, whether related to our products or business or commercial relationships, may require significant expenditures of time and other resources. Litigation also is inherently uncertain, and we could experience significant adverse results. In addition, adverse publicity surrounding an allegation of a defect, regulatory violation or other matter (with or without corresponding litigation or governmental investigation) may cause significant reputational harm that could have a significant adverse effect on our sales.

Item 1A. Risk Factors (continued)

A change in our requirements where we have long-term supply arrangements committing us to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller ("take-or-pay" contracts). We have entered into a number of long-term supply contracts that require us to purchase a fixed quantity of parts to be used in the production of our vehicles. If our need for any of these parts were to lessen, we could still be required to purchase a specified quantity of the part or pay a minimum amount to the seller pursuant to the take-or-pay contract, which could have a substantial adverse effect on our financial condition or results of operations.

Adverse effects on our results from a decrease in or cessation or clawback of government incentives related to investments. We receive economic benefits from national, state and local governments in various regions of the world in the form of incentives designed to encourage manufacturers to establish, maintain or increase investment, workforce or production. These incentives may take various forms, including grants, loan subsidies, and tax abatements or credits. The impact of these incentives can be significant in a particular market during a reporting period. For example, most of our manufacturing facilities in South America are located in Brazil, where the state or federal governments have historically offered, and continue to offer, significant incentives to manufacturers to encourage capital investment, increase manufacturing production, and create jobs. As a result, the performance of our South American operations has been impacted favorably by government incentives to a substantial extent as we have increased our investment and manufacturing presence in Brazil, and we expect this favorable impact to continue for the next several years. A decrease in, expiration without renewal of, or other cessation or clawback of government incentives for any of our business units, as a result of administrative decision or otherwise, could have a substantial adverse impact on our financial condition and results of operations, as well as our ability to fund new investments. See Note 2 of the Notes to the Financial Statements for discussion of the accounting for government incentives, and "Item 3. Legal Proceedings" for discussion of administrative tax proceedings in Brazil.

Inherent limitations of internal controls impacting financial statements and safeguarding of assets. Our internal control over financial reporting and our operating internal controls may not prevent or detect misstatements or loss of assets because of inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to financial statement accuracy and safeguarding of assets.

Cybersecurity risks to operational systems, security systems, or infrastructure owned by us or a third-party vendor, or at a supplier facility. Interruptions, outages, or breaches of operational systems (including business, financial, accounting, data processing, in-vehicle, or manufacturing processes), security systems, or infrastructure, as a result of cyber incidents, could materially disrupt critical operations, disclose confidential intellectual property, and/or give rise to allegations of or result in a breach of data privacy or other regulations within or outside the United States.

Failure of financial institutions to fulfill commitments under committed credit facilities. Under our secured Credit Agreement dated December 15, 2006, as amended and restated on November 24, 2009 and as further amended ("Credit Agreement"), we are able to borrow, repay, and then re-borrow up to $8.9 billion until the facility terminates. If the financial institutions that provide these or other committed credit facilities were to default on their obligation to fund the commitments, these facilities would not be available to us, which could substantially adversely affect our liquidity and financial condition. For discussion of our Credit Agreement, see "Liquidity and Capital Resources" in Item 7 and Note 18 of the Notes to the Financial Statements.

Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors. In 2005 and 2006, the credit ratings assigned to Ford Credit were lowered to below investment grade, which increased its unsecured borrowing costs and restricted its access to the unsecured debt markets. In response, Ford Credit increased its use of securitization transactions (including other structured financings) and other sources of funding. Although Ford Credit has experienced several credit rating upgrades in the past two years and its credit spreads have narrowed considerably, its credit ratings remain below investment grade and Ford Credit still utilizes asset-backed securitization transactions for a substantial amount of its funding.

Ford Credit's ability to obtain funding under its committed asset-backed liquidity programs and certain other asset-backed securitization transactions is subject to having a sufficient amount of assets eligible for these programs, as well as Ford Credit's ability to obtain appropriate credit ratings and, for certain committed programs, derivatives to manage the interest rate risk. Over time, and particularly in the event of any credit rating downgrades, market volatility, market disruption, or other factors, Ford Credit may reduce the amount of receivables it purchases or originates because of funding constraints. In addition, Ford Credit may reduce the amount of receivables it purchases or originates if there were a significant decline in the demand for the types of securities it offers or Ford Credit was unable to obtain derivatives to manage the interest rate risk associated with its securitization transactions. A significant reduction in the amount of

Item 1A. Risk Factors (continued)

receivables Ford Credit purchases or originates would significantly reduce its ongoing profits and could substantially adversely affect its ability to support the sale of Ford vehicles.

Higher-than-expected credit losses, lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles. Credit risk is the possibility of loss from a customer's or dealer's failure to make payments according to contract terms. Credit risk (which is heavily dependent upon economic factors including unemployment, consumer debt service burden, personal income growth, dealer profitability, and used car prices) has a significant impact on Ford Credit's business. The level of credit losses Ford Credit may experience could exceed its expectations and adversely affect its financial condition and results of operations. In addition, Ford Credit projects expected residual values (including residual value support payments from Ford) and return volumes for the vehicles it leases. Actual proceeds realized by Ford Credit upon the sale of returned leased vehicles at lease termination may be lower than the amount projected, which would reduce the profitability of the lease transaction. Among the factors that can affect the value of returned lease vehicles are the volume of vehicles returned, economic conditions, and quality or perceived quality, safety, fuel efficiency, or reliability of the vehicles. Actual return volumes may be higher than expected and can be influenced by contractual lease end values relative to auction values, marketing programs for new vehicles, and general economic conditions. Each of these factors, alone or in combination, has the potential to adversely affect Ford Credit's profitability if actual results were to differ significantly from Ford Credit's projections. See "Critical Accounting Estimates" in Item 7 for additional discussion.

Increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles. No single company is a dominant force in the automotive finance industry. Most of Ford Credit's bank competitors in the United States use credit aggregation systems that permit dealers to send, through standardized systems, retail credit applications to multiple finance sources to evaluate financing options offered by these finance sources. This process has resulted in greater competition based on financing rates. In addition, Ford Credit may face increased competition on wholesale financing for Ford dealers. Competition from such competitors with lower borrowing costs may increase, which could substantially adversely affect Ford Credit's profitability and the volume of its business.

New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions. As a finance company, Ford Credit is highly regulated by governmental authorities in the locations in which it operates, which can impose significant additional costs and/or restrictions on its business. In the United States, for example, Ford Credit's operations are subject to regulation, supervision, and licensing under various federal, state, and local laws and regulations, including the federal Truth-in-Lending Act, Equal Credit Opportunity Act, and Fair Credit Reporting Act.

Congress also passed the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Act") in 2010 to reform practices in the financial services industries, including automotive financing and securitizations. The Act directs federal agencies to adopt rules to regulate the consumer finance industry and the capital markets and, among other things, gives the new Consumer Financial Protection Bureau broad rule-making authority for a wide range of consumer protection laws that will regulate consumer finance businesses, such as Ford Credit's retail automotive financing business. The Act also creates an alternative liquidation framework under which the Federal Deposit Insurance Corporation ("FDIC") may be appointed as receiver of a non-bank financial company if the U.S. Treasury Secretary (in consultation with the President of the United States) determines that the company is in default or danger of default and the resolution of the company under other applicable law (e.g., U.S. bankruptcy law) would have serious adverse effects on the financial stability of the United States. The FDIC's powers under this framework may vary from those of a bankruptcy court under U.S. bankruptcy law, which could adversely impact securitization markets, including Ford Credit's funding activities, regardless of whether Ford Credit ever is determined to be subject to the Act's alternative liquidation framework.

Federal agencies are given significant discretion in drafting the rules and regulations necessary to implement the Act, and, consequently, the effects of the Act on the capital markets and the consumer finance industry may not be known for years. The Act and its implementing rules and regulations could impose additional costs on Ford Credit and adversely affect its ability to conduct its business.

In some countries outside the United States, Ford Credit's subsidiaries are regulated banking institutions and are required, among other things, to maintain minimum capital reserves. In many other locations, governmental authorities require companies to have licenses in order to conduct financing businesses. Efforts to comply with these laws and regulations impose significant costs on Ford Credit, and affect the conduct of its business. Additional regulation could add significant cost or operational constraints that might impair Ford Credit's profitability.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Our principal properties include manufacturing and assembly facilities, distribution centers, warehouses, sales or administrative offices, and engineering centers.

We own substantially all of our U.S. manufacturing and assembly facilities, although many of these properties have been pledged to secure indebtedness or other obligations. Our facilities are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, transmission plants, and other component plants. About half of our distribution centers are leased (we own approximately 54% of the total square footage, and lease the balance). A substantial amount of our warehousing is provided by third-party providers under service contracts. Because the facilities provided pursuant to third-party service contracts need not be dedicated exclusively or even primarily to our use, these spaces are not included in the number of distribution centers/warehouses listed in the table below. The majority of the warehouses that we operate are leased, although many of our manufacturing and assembly facilities contain some warehousing space. Substantially all of our sales offices are leased space. Approximately 99% of the total square footage of our engineering centers and our supplementary research and development space is owned by us. Many of the facilities, as well as most of the machinery and equipment, that we own and operate in the United States have been pledged to secure our obligations under the Credit Agreement. For discussion of the Credit Agreement, see "Liquidity and Capital Resources" in Item 7 and Note 18 of the Notes to the Financial Statements.

In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers, and engineering centers outside of the United States. We own substantially all of our non-U.S. manufacturing plants, assembly facilities, and engineering centers. The majority of our parts distribution centers outside of the United States are either leased or provided by vendors under service contracts. As in the United States, space provided by vendors under service contracts need not be dedicated exclusively or even primarily to our use, and is not included in the number of distribution centers/warehouses listed in the table below.

The total number of plants, distribution centers/warehouses, engineering and research and development sites, and sales offices used by our Automotive segments as of December 31, 2011 are shown in the table below:



Segment	Plants		Distribution Centers/ Warehouses	Engineering, Research/ Development	Sales Offices
Ford North America	35	(a)	30	45	60
Ford South America	8		3	1	8
Ford Europe	14		7	4	25
Ford Asia Pacific Africa	12		1	6	17
Total	69		41	56	110

____________

(a)

We have announced plans to close a number of North American facilities as part of our restructuring actions; facilities that have been closed to date are not included in the table. The table includes four facilities operated by Automotive Components Holdings, LLC ("ACH"), which is controlled by us. We plan to close one of the remaining ACH plants in 2012. We are exploring our options for the three remaining ACH plants (i.e., Saline, Sandusky, and Sheldon Road), and intend to transition these businesses to the supply base as soon as practicable.

Included in the number of plants shown above are several plants that are not operated directly by us, but rather by consolidated joint ventures that operate plants that support our Automotive sector. As of December 31, 2011, the significant consolidated joint ventures and the number of plants each owns is as follows:

•

Ford Lio Ho Motor Company Ltd. ("FLH") — a joint venture in Taiwan among Ford (70% partner), the Lio Ho Group (25% partner) and individual shareholders (5% ownership in aggregate) that assembles a variety of Ford and Mazda vehicles sourced from Ford as well as Mazda. In addition to domestic assembly, FLH also has local product development capability to modify vehicle designs for local needs, and imports Ford-brand built-up vehicles from Europe and the United States. This joint venture operates one plant.


•	Ford Vietnam Limited — a joint venture between Ford (75% partner) and Song Cong Diesel Limited Company (25% partner). Ford Vietnam Limited assembles and distributes a variety of Ford passenger and commercial vehicle models. This joint venture operates one plant.

ITEM 2. Properties (continued)

In addition to the plants that we operate directly or that are operated by consolidated joint ventures, additional plants that support our Automotive sector are operated by unconsolidated joint ventures of which we are a partner. These plants are not included in the number of plants shown in the table above. The most significant of these joint ventures are:

•

AAI — a 50/50 joint venture with Mazda that operates as its principal business an automobile assembly plant in Flat Rock, Michigan. AAI currently produces the Mazda6 and Ford Mustang models. We supply all of the hourly and substantially all of the salaried personnel requirements to AAI, and AAI reimburses us for the cost. Production of the Mazda6 at the AAI facility is scheduled to end later this year, while production of the Ford Fusion is scheduled to begin at this facility in 2013.

•

AutoAlliance (Thailand) Co., Ltd. ("AAT") — a joint venture among Ford (50%), Mazda (45%) and a Thai affiliate of Mazda's (5%) that owns and operates a manufacturing plant in Rayong, Thailand. AAT produces Ford and Mazda products for domestic sale and export, the latter in both built-up and kit form with export of certain products to markets outside the Asia Pacific Africa region. Production includes the Ford Everest sport utility vehicle and the Ford Ranger and Mazda BT-50 pickup trucks. With the completion of a significant expansion of the facility and implementation of new, highly flexible manufacturing equipment and processes, production now also includes the Ford Fiesta, Mazda2, and Mazda3 small passenger cars.

•

Blue Diamond Parts, LLC ("Blue Diamond Parts") — a joint venture between Ford (25% partner) and Navistar International Corporation (formerly known as International Truck and Engine Corporation) ("Navistar") (75% partner), in which the two partners share equal voting rights. Blue Diamond Parts manages sourcing, merchandising, and distribution of certain service parts for trucks sold in North America. We will continue to collaborate on this joint venture.

•

Blue Diamond Truck, S. de R.L. de C.V. ("Blue Diamond Truck") — a joint venture between Ford (25% partner) and Navistar (75% partner), in which the two partners share equal voting rights. Blue Diamond Truck develops and manufactures selected medium-duty commercial trucks in Mexico and sells the vehicles to Ford and Navistar for distribution. We have given notice that we are terminating the Blue Diamond Truck joint venture effective September 2014, and will in-source production of F-650/750 trucks to our Ohio Assembly Plant.


•	Changan Ford Mazda Automobile Corporation, Ltd. ("CFMA") — a joint venture among Ford (35% partner), Mazda (15% partner), and the Chongqing Changan Automobile Co., Ltd. ("Changan") (50% partner). Through its facilities in the Chinese cities of Chongqing and Nanjing, CFMA produces and distributes in China an expanding variety of Ford passenger car models, as well as Mazda and Volvo models.


•	Changan Ford Mazda Engine Company, Ltd. ("CFME") — a joint venture among Ford (25% partner), Mazda (25% partner), and the Chongqing Changan Automobile Co., Ltd (50% partner). CFME is located in Nanjing, and produces the Ford New I4 and Mazda BZ engines in support of the assembly of Ford- and Mazda-branded vehicles manufactured in China.

•

Ford Otosan — a joint venture in Turkey between Ford (41% partner), the Koc Group of Turkey (41% partner), and public investors (18%) that is a major supplier of the Ford Transit Connect vehicle and our sole distributor of Ford vehicles in Turkey. In addition, Ford Otosan makes the Ford Transit series and the Cargo truck for the Turkish and export markets, and certain engines and transmissions, most of which are under license. This joint venture owns and operates two plants, a parts distribution depot, and a Product Development Center in Turkey.

•

Ford Romania S.A. — we completed the acquisition of the Romanian company S.C. Automobile Craiova, S.A. ("ACSA"), and now have 100% ownership. Although we manage the day-to-day operations in Craiova, pursuant to the sale and purchase agreement the Romanian government maintains the ability to influence certain key decisions regarding the business until March 2012. We have been in discussions with the Romanian government to renegotiate some of the terms of the sale and purchase agreement, including an extension of the agreement to January 2013. We anticipate that we will consolidate the operations upon cessation of the government's control and participation pursuant to the sale and purchase agreement. This entity includes a vehicle assembly plant, an engine assembly plant, and the sales activities of Ford in Romania. In mid-2012, the plant will commence production of the all-new B-MAX for sale in Europe and the production of a new high-technology small 3-cylinder engine.


•	FordSollers — a new 50/50 joint venture between Ford and Sollers OJSC, which was launched on October 1, 2011. We contributed our operations in Russia, consisting primarily of a manufacturing plant and access to our Russian dealership network. Sollers OJSC contributed two production facilities and will support the

ITEM 2. Properties (continued)

joint venture through its manufacturing capabilities, knowledge of the Russian market, experience in distribution, and work with the Russian supply base. In addition, we granted to the joint venture an exclusive right to manufacture, assemble, and distribute certain Ford-brand vehicles in Russia through the licensing of certain trademarks and intellectual property rights. The joint venture primarily will be engaged in manufacturing a range of Ford passenger cars and light commercial vehicles. The application to the Russian government for this joint venture to participate in the new industrial assembly regime, which will qualify it for reduced import duties for parts imported into Russia, was approved on June 1, 2011.

•

Getrag Ford Transmissions GmbH ("Getrag Ford") — a 50/50 joint venture with Getrag Deutsche Venture GmbH and Co. KG, a German company, to which we transferred our European manual transmission operations, including plants, from Halewood, England; Cologne, Germany; and Bordeaux, France. In 2008, we added the Kechnec plant in Slovakia. Getrag Ford operates these four plants, producing manual transmissions for Ford Europe and Volvo. We supply most of the hourly and salaried labor requirements of the operations transferred to this joint venture; in the event of surplus labor at the joint venture, our employees assigned to Getrag Ford may return to Ford. Getrag Ford reimburses us for the full cost of the hourly and salaried labor we supply.

•

JMC — a publicly-traded company in China with Ford (30% shareholder) and Jiangxi Jiangling Holdings, Ltd. (41% shareholder) as its controlling shareholders. Jiangxi Jiangling Holdings, Ltd. is a 50/50 joint venture between Chongqing Changan Automobile Co., Ltd. and Jiangling Motors Company Group. The public investors of JMC own 29% of its outstanding shares. JMC assembles the Ford Transit van and other non-Ford-technology-based vehicles for distribution in China.

•

Tenedora Nemak, S.A. de C.V. — a joint venture between Ford (6.75% partner) and a subsidiary of Mexican conglomerate Alfa S.A. de C.V. (93.25% partner), which owns and operates, among other facilities, a portion of our former Canadian castings operations, and supplies engine blocks and heads to several of our engine plants. We currently supply a portion of the hourly labor requirements for the Canadian plant, for which it is fully reimbursed by the joint venture. Beginning mid-year, the joint venture will supply all of its hourly labor requirements.

The facilities owned or leased by us or our subsidiaries and joint ventures described above are, in the opinion of management, suitable and more than adequate for the manufacture and assembly of our products.

The furniture, equipment and other physical property owned by our Financial Services operations are not material in relation to their total assets.

ITEM 3. Legal Proceedings

The litigation process is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. See Note 30 of the Notes to the Financial Statements for discussion of loss contingencies.

Following is a discussion of our significant pending legal proceedings:

PRODUCT LIABILITY MATTERS

We are a defendant in numerous actions in state and federal courts within and outside of the United States alleging damages from injuries resulting from (or aggravated by) alleged defects in our vehicle lines of various model years. In many, no dollar amount of damages is specified, or the specific amount alleged is the jurisdictional minimum. Our experience with litigation alleging a specific amount of damages suggests that such amounts, on average, bear little relation to the actual amount of damages, if any, that we will pay in resolving such matters. Any damages we pay in a negotiated settlement or as the result of a verdict generally have been, on average, substantially less than the amounts originally claimed.

Based on our knowledge of the facts and circumstances asserted, our historical experience with matters of a similar nature, and our assessment of the likelihood of prevailing and the severity of any potential loss, we establish litigation accruals. In addition to pending actions, we assess the likelihood of incidents that likely have occurred but not yet been reported to us; we also take into consideration specific matters that have been raised as claims but have not yet proceeded to litigation. Individual product liability matters which, if resolved unfavorably to the Company, likely would involve a significant cost would be described herein. Currently there are no such matters to report.

Item 3. Legal Proceedings (continued)

ASBESTOS MATTERS

Asbestos was used in some brakes, clutches, and other automotive components from the early 1900s. Along with other vehicle manufacturers, we have been the target of asbestos litigation and, as a result, are a defendant in various actions for injuries claimed to have resulted from alleged exposure to Ford parts and other products containing asbestos. Plaintiffs in these personal injury cases allege various health problems as a result of asbestos exposure, either from component parts found in older vehicles, insulation or other asbestos products in our facilities, or asbestos aboard our former maritime fleet. We believe that we are being targeted more aggressively in asbestos suits because many previously-targeted companies have filed for bankruptcy.

Most of the asbestos litigation we face involves individuals who claim to have worked on the brakes of our vehicles over the years. We are prepared to defend these cases, and believe that the scientific evidence confirms our long-standing position that there is no increased risk of asbestos-related disease as a result of exposure to the type of asbestos formerly used in the brakes on our vehicles. The extent of our financial exposure to asbestos litigation remains very difficult to estimate and could include both compensatory and punitive damage awards. The majority of our asbestos cases do not specify a dollar amount for damages; in many of the other cases the dollar amount specified is the jurisdictional minimum, and the vast majority of these cases involve multiple defendants, with the number in some cases exceeding one hundred. Many of these cases also involve multiple plaintiffs, and often we are unable to tell from the pleadings which plaintiffs are making claims against us (as opposed to other defendants). Annual payout and defense costs may become significant in the future.

ENVIRONMENTAL MATTERS

We have received notices under various federal and state environmental laws that we (along with others) are or may be a potentially responsible party for the costs associated with remediating numerous hazardous substance storage, recycling, or disposal sites in many states and, in some instances, for natural resource damages. We also may have been a generator of hazardous substances at a number of other sites. The amount of any such costs or damages for which we may be held responsible could be significant.

Following are individual environmental legal proceedings to which a governmental authority is a party and in which there is the possibility of monetary sanctions in excess of $100,000:

Edison Assembly Plant Concrete Disposal. During demolition of our Edison Assembly Plant, we discovered very low levels of contaminants in the concrete slab. The concrete was crushed and reused by several developers as fill material at ten different off-site locations. The New Jersey Department of Environmental Protection ("DEP") asserts that some of these locations may not have been authorized to receive the waste. In 2006, DEP ordered us, supplier MIG-Alberici, Inc., and developer Edgewood Properties, Inc., to investigate, and, if appropriate, remove contaminated materials. We have substantially completed the work at a number of locations, and Edgewood is completing the investigation and remediation at several locations it owns. We resolved the matter with DEP through an administrative consent order ("Order"), pursuant to which we paid approximately $460,000 for oversight costs, penalties, and environmental education projects, and donated emissions reduction credits to the State of New Jersey. After reviewing comments submitted by Edgewood, DEP finalized the Order in 2009. Edgewood appealed issuance of the Order to the Appellate Division of the New Jersey Superior Court.

CLASS ACTIONS

In light of the fact that very few of the purported class actions filed against us in the past ever have been certified by the courts as class actions, the actions listed below are those (i) that have been certified as a class action by a court of competent jurisdiction (and any additional purported class actions that raise allegations substantially similar to a certified case), and (ii) that, if resolved unfavorably to the Company, likely would involve a significant cost.

Canadian Export Antitrust Class Actions. Eighty-three purported class actions on behalf of all purchasers of new motor vehicles in the United States since January 1, 2001 have been filed in various state and federal courts against numerous defendants, including us. The complaints allege, among other things, that vehicle manufacturers, aided by dealer associations, conspired to prevent the sale to U.S. citizens of vehicles produced for the Canadian market and sold by dealers in Canada at lower prices than vehicles sold in the United States. The complaints seek injunctive relief under federal antitrust law and treble damages under federal and state antitrust laws. The federal actions were consolidated for coordinated pretrial proceedings in the U.S. District Court for the District of Maine and have been dismissed. Cases remain pending in state courts in Florida, New Mexico, Tennessee, and Wisconsin. In California, where a statewide class had been certified, the court recently granted Ford's motion for summary judgment; an appeal by the plaintiffs is possible.

Item 3. Legal Proceedings (continued)

Medium/Heavy Truck Sales Procedure Class Action. This action pending in the Ohio state court system alleges that Ford breached its Sales and Service Agreement with Ford truck dealers by failing to publish to all Ford dealers all price concessions that were approved for any dealer. The trial court certified a nationwide class consisting of all Ford dealers who purchased from Ford any 600-series or higher truck from 1987 to 1997, and granted plaintiffs' motion for summary judgment on liability. In February 2011, the jury awarded $4.5 million in damages to the named plaintiff dealer, as previously reported. In June 2011, the trial court applied the jury's findings with regard to the named plaintiff to all dealers in the class, entering a judgment of approximately $2 billion in damages (comprised of about $800 million in damages, and $1.2 billion in pre-judgment interest). The trial court also denied our motion to decertify the class. We have appealed, and we believe the law supports our position.

OTHER MATTERS

Apartheid Litigation. Along with two other prominent multinational companies, we are a defendant in purported class action lawsuits seeking unspecified damages on behalf of South African citizens who suffered violence and oppression under South Africa's apartheid regime. The lawsuits allege that the defendant companies aided and abetted the apartheid regime and its human rights violations. These cases, collectively referred to as In re South African Apartheid Litigation, were initially filed in 2002 and 2003, and are being handled together as coordinated "multidistrict litigation" in the U.S. District Court for the Southern District of New York. The District Court dismissed these cases in 2004, but in 2007 the U.S. Court of Appeals for the Second Circuit reversed and remanded the cases to the District Court for further proceedings. Amended complaints were filed during 2008; motions to dismiss have been granted in part and denied in part, and defendants' appeal to the U.S. Court of Appeals is pending.

Brazilian State Tax Matters. Two Brazilian states have levied tax assessments against Ford Brazil, claiming that certain state tax incentives from the state of Bahia did not receive formal approval from the organization of Brazilian state treasury offices. We have appealed the assessment to the administrative level in each state; if we do not prevail at the administrative level, we plan to appeal to the relevant state court, which likely would require us to post significant cash or other collateral in order to proceed. We also have been notified that a third state is beginning an audit relating to these incentives; under that state's system, we may need to post significant cash or other collateral at the beginning of the administrative process to challenge any assessment.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 4A. Executive Officers of Ford

Our executive officers are as follows, along with each executive officer's position and age at February 1, 2012:



Name	Position	Position Held Since	Age
William Clay Ford, Jr. (a)	Executive Chairman and Chairman of the Board	Sept. 2006	54
Alan Mulally (b)	President and Chief Executive Officer	Sept. 2006	66
Michael E. Bannister	Executive Vice President – Chairman and Chief Executive Officer, Ford Motor Credit Co.	Oct. 2007	62
Lewis W. K. Booth (c)	Executive Vice President and Chief Financial Officer	Nov. 2008	63
Mark Fields	Executive Vice President – President, The Americas	Oct. 2005	51
John Fleming	Executive Vice President – Global Manufacturing and Labor Affairs	Dec. 2009	61
Tony Brown	Group Vice President – Purchasing	Apr. 2008	55
James D. Farley, Jr.	Group Vice President – Global Marketing, Sales and Service	Nov. 2007	49
Felicia Fields	Group Vice President – Human Resources and Corporate Services	Apr. 2008	46
Bennie Fowler	Group Vice President – Quality	Apr. 2008	55
Joseph R. Hinrichs	Group Vice President – President, Asia Pacific and Africa	Dec. 2009	45
Derrick M. Kuzak (c)	Group Vice President – Global Product Development	Dec. 2006	60
David G. Leitch	Group Vice President and General Counsel	Apr. 2005	51
J C. Mays	Group Vice President and Chief Creative Officer – Design	Aug. 2003	57
Stephen T. Odell	Group Vice President, Chairman and CEO, Ford of Europe	Aug. 2010	56
Ziad S. Ojakli	Group Vice President – Government and Community Relations	Jan. 2004	44
Nick Smither	Group Vice President – Chief Information Officer	Apr. 2008	53
Bob Shanks (c)	Vice President and Controller	Sept. 2009	59

____________


(a)	Also a Director, Chair of the Office of the Chairman and Chief Executive, Chair of the Finance Committee and a member of the Sustainability Committee of the Board of Directors.


(b)	Also a Director and member of the Office of the Chairman and Chief Executive and the Finance Committee of the Board of Directors.


(c)	We made the following personnel announcements on February 9, 2012, with the changes effective April 1, 2012:


◦	Mr. Booth has elected to retire, and will be succeeded as Executive Vice President and Chief Financial Officer by Mr. Shanks;


◦	Mr. Kuzak has elected to retire, and will be succeeded as Group Vice President - Global Product Development by Raj Nair, currently the vice president of Engineering within Global Product Development; and


◦	Mr. Shanks will be succeeded as Vice President and Controller by Stuart Rowley, currently the chief financial officer for Ford Europe.

With the exceptions noted below, each of the officers listed above has been employed by Ford or its subsidiaries in one or more capacities during the past five years. Described below are the recent positions (other than those with Ford or its subsidiaries) held by those officers who have not yet been with Ford or its subsidiaries for five years:

•

Prior to joining Ford in November 2007, Mr. Farley was Group Vice President and General Manager of Lexus, responsible for all sales, marketing and customer satisfaction activities for Toyota's luxury brand. Before leading Lexus, he served as group vice president of Toyota Division marketing and was responsible for all Toyota Division market planning, advertising, merchandising, sales promotion, incentives and internet activities.

Under our by-laws, executive officers are elected by the Board of Directors at an annual meeting of the Board held for this purpose. Each officer is elected to hold office until a successor is chosen or as otherwise provided in the by-laws.

PART II.

ITEM 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common Stock is listed on the New York Stock Exchange in the United States, and on certain stock exchanges in Belgium and France.

The table below shows the high and low sales prices for our Common Stock and the dividends we paid per share of Common and Class B Stock for each quarterly period in 2010 and 2011:



	2010								2011
Ford Common Stock price per share (a)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
High	$	14.54	$	14.57	$	13.24	$	17.42	$	18.97	$	16.18	$	14.22	$	12.65
Low	10.05		9.75		10.02		12.12		13.75		12.65		9.32		9.05
Dividends per share of Ford Common and Class B Stock (b)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

__________


(a)	New York Stock Exchange composite intraday prices as listed in the price history database available at www.NYSEnet.com.

(b)

See "Liquidity and Capital Resources" in Item 7 and Note 18 of the Notes to the Financial Statements for information regarding certain limitations on our ability to pay dividends on our Common and Class B Stock under the Credit Agreement. On December 8, 2011, our Board of Directors declared a dividend on our Common and Class B Stock of $0.05 per share payable on March 1, 2012 to stockholders of record on January 31, 2012, which is within the limitations under the Credit Agreement.

As of February 13, 2012, stockholders of record of Ford included 158,445 holders of Common Stock (which number does not include 128 holders of old Ford Common Stock who have not yet tendered their shares pursuant to our recapitalization, known as the Value Enhancement Plan, which became effective on August 9, 2000) and 81 holders of Class B Stock.

During the fourth quarter of 2011, we purchased shares of Ford Common Stock as follows:



Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly- Announced Plans or Programs (b)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (b)
October 1, 2011 through October 31, 2011	—	$	—	—	—
November 1, 2011 through November 30, 2011	—	—		—	—
December 1, 2011 through December 31, 2011	31,142	10.85		—	—
Total/Average	31,142	10.85		—	—

__________


(a)	Shares were acquired from our employees or directors in accordance with our various compensation plans as a result of share withholdings to pay: (i) income tax related to the lapse of restrictions on restricted stock or the issuance of unrestricted stock; and (ii) the exercise price and related income taxes with respect to certain exercises of stock options.


(b)	We did not have a publicly-announced repurchase program in the fourth quarter of 2011. In 2012, we plan to commence a modest anti-dilutive share repurchase program for Common Stock in an amount up to an estimated $150 million to offset the dilutive effect of share-based compensation.

For discussion of our outstanding convertible notes and warrants, convertible and exercisable into our Common Stock, see Note 24 of the Notes to the Financial Statements.

ITEM 6. Selected Financial Data

On January 1, 2010, we adopted the new accounting standard regarding consolidation of VIEs. We have applied the standard retrospectively to periods covered in this Report, and present prior-year financial statement data on a basis that is revised for the application of this standard. The following table sets forth selected financial data for each of the last five years (dollar amounts in millions, except for per share amounts).



SUMMARY OF OPERATIONS	2011			2010			2009			2008			2007
Total Company
Sales and revenues	$	136,264		$	128,954		$	116,283		$	143,584		$	168,884

Income/(Loss) before income taxes	$	8,681		$	7,149		$	2,599		$	(14,895	)	$	(4,286	)
Provision for/(Benefit from) income taxes	(11,541		)	592			(113		)	(62		)	(1,467		)
Income/(Loss) from continuing operations	20,222			6,557			2,712			(14,833		)	(2,819		)
Income/(Loss) from discontinued operations	—			—			5			9			41
Income/(Loss) before cumulative effects of changes in accounting principles	20,222			6,557			2,717			(14,824		)	(2,778		)
Cumulative effects of changes in accounting principles	—			—			—			—			—
Net income/(loss)	20,222			6,557			2,717			(14,824		)	(2,778		)
Less: Income/(Loss) attributable to noncontrolling interests	9			(4		)	—			(58		)	17
Net income/(loss) attributable to Ford Motor Company	$	20,213		$	6,561		$	2,717		$	(14,766	)	$	(2,795	)

Automotive Sector
Sales	$	128,168		$	119,280		$	103,868		$	127,635		$	152,691
Operating income/(loss)	5,763			5,789			(3,352		)	(9,976		)	(4,979		)
Income/(Loss) before income taxes	6,250			4,146			785			(12,314		)	(5,510		)

Financial Services Sector
Revenues	$	8,096		$	9,674		$	12,415		$	15,949		$	16,193
Income/(Loss) before income taxes	2,431			3,003			1,814			(2,581		)	1,224

Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
Basic:
Income/(Loss) from continuing operations	$	5.33		$	1.90		$	0.91		$	(6.50	)	$	(1.43	)
Income/(Loss) from discontinued operations	—			—			—			—			0.02
Cumulative effects of change in accounting principles	—			—			—			—			—
Net income/(loss)	$	5.33		$	1.90		$	0.91		$	(6.50	)	$	(1.41	)
Diluted:
Income/(Loss) from continuing operations	$	4.94		$	1.66		$	0.86		$	(6.50	)	$	(1.43	)
Income/(Loss) from discontinued operations	—			—			—			—			0.02
Cumulative effects of change in accounting principles	—			—			—			—			—
Net income/(loss)	$	4.94		$	1.66		$	0.86		$	(6.50	)	$	(1.41	)
Cash dividends	$	0.05		$	—		$	—		$	—		$	—

Common Stock price range (NYSE Composite Intraday)
High	$	18.97		$	17.42		$	10.37		$	8.79		$	9.70
Low	9.05			9.75			1.50			1.01			6.65
Average number of shares of Ford Common and Class B Stock outstanding (in millions)	3,793			3,449			2,992			2,273			1,979

SECTOR BALANCE SHEET DATA AT YEAR-END
Assets
Automotive sector	$	78,786		$	64,606		$	79,118		$	71,556		$	115,484
Financial Services sector	101,574			103,270			119,112			151,667			169,261
Intersector elimination	(1,112		)	(2,083		)	(3,224		)	(2,535		)	(2,023		)
Total assets	$	179,248		$	165,793		$	195,006		$	220,688		$	282,722

Debt
Automotive sector	$	13,094		$	19,077		$	33,610		$	23,319		$	24,190
Financial Services sector	86,595			85,112			98,671			128,842			141,833
Intersector elimination (a)	(201		)	(201		)	(646		)	(492		)	—
Total debt	$	99,488		$	103,988		$	131,635		$	151,669		$	166,023

Total Equity/(Deficit)	$	15,071		$	(642	)	$	(7,782	)	$	(15,371	)	$	7,771

__________


(a)	Debt related to Ford's acquisition of Ford Credit debt securities; see Note 18 of the Notes to the Financial Statements for additional detail.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Revenue

Our Automotive sector's revenue is generated primarily by sales of vehicles, parts, and accessories. Revenue is recorded when all risks and rewards of ownership are transferred to our customers (generally, our dealers and distributors). For the majority of sales, this occurs when products are shipped from our manufacturing facilities. This is not the case, however, with respect to vehicles produced for sale to daily rental car companies that are subject to a guaranteed repurchase option. These vehicles are accounted for as operating leases, with lease revenue and profits recognized over the term of the lease. When we sell the returned vehicle at auction, we recognize a gain or loss on the difference, if any, between actual auction value and the projected auction value. In addition, revenue for finished vehicles we sell to customers or vehicle modifiers on consignment is not recognized until the vehicle is sold to the ultimate customer.

Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit. Upon Ford Credit originating the wholesale receivable related to a dealer's purchase of a vehicle, Ford Credit pays cash to the relevant legal entity in our Automotive sector in payment of the dealer's obligation for the purchase price of the vehicle. The dealer then pays the wholesale finance receivable to Ford Credit when it sells the vehicle to a retail customer.

Our Financial Services sector's revenue is generated primarily from interest on finance receivables, net of certain deferred origination costs that are included as a reduction of financing revenue, and such revenue is recognized over the term of the receivable using the interest method. Also, revenue from operating leases, net of certain deferred origination costs, is recognized on a straight-line basis over the term of the lease. Income is generated to the extent revenues exceed expenses, most of which are interest, depreciation, and operating expenses.

Transactions between our Automotive and Financial Services sectors occur in the ordinary course of business. For example, we offer special retail and lease incentives to dealers' customers who choose to finance or lease our vehicles from Ford Credit. The estimated cost for these incentives is recorded as revenue reduction to Automotive sales at the later of the date the related vehicle sales to our dealers are recorded or the date the incentive program is both approved and communicated. In order to compensate Ford Credit for the lower interest or lease rates offered to the retail customer, we pay the discounted value of the incentive directly to Ford Credit when it originates the retail finance or lease contract with the dealer's customer. Ford Credit recognizes the amount over the life of the related contracts as an element of financing revenue. See Note 1 of the Notes to the Financial Statements for a more detailed discussion of transactions and payments between our Automotive and Financial Services sectors.

Costs and Expenses

Our statement of operations classifies our Automotive total costs and expenses into two categories: (i) cost of sales, and (ii) selling, administrative and other expenses. We include within cost of sales those costs related to the development, manufacture, and distribution of our vehicles, parts and accessories. Specifically, we include in cost of sales each of the following: material costs (including commodity costs); freight costs; warranty, product recall and customer satisfaction program costs; labor and other costs related to the development and manufacture of our products; depreciation and amortization; and other associated costs. We include within selling, administrative and other expenses labor and other costs not directly related to the development and manufacture of our products, including such expenses as advertising and sales promotion costs.

Certain of our costs, such as material costs, generally vary directly with changes in volume and mix of production. In our industry, production volume often varies significantly from quarter to quarter and year to year. Quarterly production volumes experience seasonal shifts throughout the year (including peak retail sales seasons, and the impact on production of model changeover and new product launches). As we have seen in recent years, annual production volumes are heavily impacted by external economic factors, including the pace of economic growth and factors such as the availability of consumer credit and cost of fuel.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

As a result, we analyze the profit impact of certain cost changes holding constant present-year volume and mix and currency exchange, in order to evaluate our cost trends absent the impact of varying production and currency exchange levels. We analyze these cost changes in the following categories:


•	Material excluding commodity costs - primarily reflecting the change in cost of purchased parts used in the assembly of our vehicles.


•	Commodity costs - reflecting the change in cost for raw materials (such as steel, aluminum, and resins) used in the manufacture of our products.


•	Structural costs - reflecting the change in costs that generally do not have a directly proportionate relationship to our production volumes, such as labor costs, including pension and health care; other costs related to the development and manufacture of our vehicles; depreciation and amortization; and advertising and sales promotion costs.


•	Warranty and other costs - reflecting the change in cost related to warranty coverage, product recalls, and customer satisfaction actions, as well as the change in freight and other costs related to the distribution of our vehicles and support for the sale and distribution of parts and accessories.

While material (including commodity), freight, and warranty costs generally vary directly in proportion to production volume, elements within our structural costs category are impacted to differing degrees by changes in production volume. We also have varying degrees of discretion when it comes to controlling the different elements within our structural costs. For example, depreciation and amortization expense largely is associated with prior capital spending decisions. On the other hand, while labor costs do not vary directly with production volume, manufacturing labor costs may be impacted by changes in volume, for example when we increase overtime, add a production shift or add personnel to support volume increases. Other structural costs, such as advertising or engineering costs, are not necessarily impacted by production volume. Our structural costs generally are within our discretion, although to varying degrees, and can be adjusted over time in response to external factors.

We consider certain structural costs to be a direct investment in future growth and revenue. For example, increases in structural costs are necessary to grow our business and improve profitability as we expand around the world, invest in new products and technologies, respond to increasing industry sales volume and grow our market share.

Automotive total costs and expenses for full-year 2011 was $122.4 billion. Material costs (including commodity costs) make up the largest portion of our Automotive total costs and expenses, representing in 2011 about two-thirds of the total amount. Of the remaining balance of our Automotive costs and expenses, the largest piece is structural costs. Although material costs are our largest absolute cost, our margins can be affected significantly by changes in any category of costs.

Key Economic Factors and Trends Affecting the Automotive Industry

Global Economic Conditions. The global economy grew by about 4% during 2010, as the economy began to emerge from deep recession. During 2011, global economic growth slowed to an estimated 3%, as the worsening debt crisis in Europe, regime changes in North Africa, natural disasters in Japan and Thailand, and moderating economic growth in several key newly-developed and emerging markets all contributed to slow growth. During 2012, global economic growth is expected to remain in the 3% range. The European debt crisis represents a key risk to economic growth. The current economic performance in many European countries, particularly Greece, Ireland, Italy, Portugal and Spain, is being hampered by excessive government debt levels and the resulting budget austerity measures that are contributing to weak economic growth. The European Union, the European Central Bank, and the International Monetary Fund have provided important support for many of these countries undergoing structural changes. During 2012, economic growth is likely to remain weak in these markets. The U.K. government has implemented budget cuts and the housing market is still working off its slump, which will continue to restrain economic conditions in the United Kingdom.

Uncertainties associated with the European debt crisis and policy responses to it could impact global economic performance in 2012. Although housing is stabilizing in some of the worst hit markets, such as the United States, the prospect of a housing recovery is hampered by high foreclosure rates and excess housing stocks.

Global industry vehicle sales volume (including medium and heavy truck) is estimated to have increased to 76 million units in 2011, up more than 2 million units - or about 3% - from 2010 levels. In 2012, global industry sales are projected to be about 80 million units. In light of the volatile external environment, however, sales could range from 75 million units to 85 million units in 2012.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Excess Capacity. According to IHS Automotive, an automotive research firm, the estimated automotive industry global production capacity for light vehicles (which as of 2011 includes an expanded truck segment compared with previous years) of about 96 million units exceeded global production by about 22 million units in 2011. In North America and Europe, the two regions where the majority of industry revenue and profits are earned, excess capacity as a percent of production is an estimated 26%. According to production capacity data projected by IHS Automotive, global excess capacity conditions could continue for several years at an average of about 24 million units per year during the period from 2012 to 2016.

Pricing Pressure. Excess capacity, coupled with a proliferation of new products being introduced in key segments, will keep pressure on manufacturers' ability to increase prices. In North America, the industry restructuring of the past few years has allowed manufacturers to better match production with demand, although Japanese and Korean manufacturers also have capacity (located outside of the region) directed to North America. In the future, Chinese and Indian manufacturers are expected to enter U.S. and European markets, further intensifying competition. Although there has been some firming of pricing in the U.S. market, particularly in 2011, it seems likely that over the long term intense competition and apparent excess capacity will continue to put downward pressure on inflation-adjusted prices for similarly-contented vehicles in the United States and contribute to a challenging pricing environment for the automotive industry. In Europe, the excess capacity situation was exacerbated by weakening demand and the lack of reductions in existing capacity, such that negative pricing pressure is expected to continue for the foreseeable future.

Commodity and Energy Price Increases. Despite weak demand conditions, oil prices increased from an average of $80 per barrel in 2010 to about $100 a barrel in late 2011. Commodity prices have declined recently, but over the longer term prices are likely to trend higher given global demand growth.

Vehicle Profitability. Our financial results depend on the profitability of the vehicles we sell, which may vary significantly by vehicle line. In general, larger vehicles tend to command higher prices and be more profitable than smaller vehicles, both across and within vehicle segments. For example, in North America, our larger, more profitable vehicles had an average contribution margin that was about 130% of our total average contribution margin across all vehicles, compared with about 70% for our smaller vehicles. As we execute our One Ford plan, we are creating best-in-class vehicles on global platforms that contribute higher margins, and offering a more balanced portfolio of vehicles with which we aim to be among the leaders in fuel efficiency in every segment in which we compete.

Increasing Sales of Smaller Vehicles. Like other manufacturers, we are increasing our participation in newly-developed and emerging markets, such as Brazil, Russia, India, and China, in which vehicle sales are expected to increase at a faster rate than in most mature markets. The largest segments in these markets are small vehicles (i.e., Sub-B, B, and C segments). To increase our participation in these fast-growing markets, we are significantly increasing our production capacity, directly or through joint ventures. In addition, we expect that increased demand for smaller, more fuel-efficient vehicles will continue in the mature markets of North America and Europe and, consequently, we have seen and expect in the future strong demand in those markets for our small car offerings (including our new Ford Fiesta and Focus models that are based on global platforms). Although we expect positive contribution margins from higher small vehicle sales, one result of increased production of small vehicles may be that, over time, our average per unit margin decreases because small vehicles tend to have lower margins than medium and large vehicles.

Currency Exchange Rate Volatility. The European debt crisis has contributed to recent financial market volatility. Coupled with the ongoing policy actions taken by central banks to support the financial system, exchange rates have remained volatile. Most recently, the euro currency value has fluctuated as progress toward a solution to the sovereign debt crisis remains highly uncertain. The high inflation in newly-developed and emerging markets and capital flight to perceived stable investments have started to erode the strength of some local currencies. In most markets, exchange rates are market-determined, and all are impacted by many different macroeconomic and policy factors. As a result, it is likely that exchange rates will remain volatile.

Other Economic Factors. The eventual implications of higher government deficits and debt, with potentially higher long-term interest rates, could drive a higher cost of capital over our planning period. Higher interest rates and/or taxes to address the higher deficits also may impede real growth in gross domestic product and, therefore, vehicle sales over our planning period.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Trends and Strategies

We remain firm in our belief that our continued focus on executing the four key priorities of our One Ford plan enables us to go further for our customers, dealers, suppliers, employees, shareholders, and other key constituencies:


•	Aggressively restructure to operate profitably at the current demand and 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.

Despite the external economic environment in recent years, we have made significant progress in transforming our business.

Aggressively Restructure to Operate Profitably

Brands. In recent years, we have eliminated a number of brands from our portfolio in order to devote fully our financial, product development, production, and marketing and sales and services resources toward further growing our core Ford brand and enhancing Lincoln. We have sold Aston Martin, Jaguar and Land Rover, and most recently Volvo. In addition to completing the sale of Volvo in the third quarter of 2010, we discontinued the Mercury brand at the end of 2010. We also reduced our stake in Mazda to 3.5 percent from 11 percent in the fourth quarter of 2010. All of these actions allow us to increase flexibility as we continue to pursue growth in key emerging markets, while also continuing our cooperation in areas of mutual benefit, such as key joint ventures and exchange of technology information.

Manufacturing. We are committed to maintaining an appropriate manufacturing footprint in markets around the world, both in the more mature markets in which we have an established presence, and in fast-growing newly-developed and emerging markets. We also are committed to ensuring that our assembly plants have flexible body shops that allow us to respond quickly to changing consumer demands. We are making substantial investments in newly-developed and emerging markets over the next few years, including in China, Thailand, and India, to increase our production capacity with flexible new manufacturing plants. We also are making substantial investments in North America, including efforts to ensure that nearly all of our U.S. assembly plants have flexible body shops by 2012. We also have converted three North American assembly plants from production of large utilities and trucks to small car production to support the increasing demand for smaller, more fuel-efficient vehicles.

Suppliers. We continue to work to strengthen our global supply base. As part of this process, we have been reducing the global number of production suppliers eligible for new product sourcing from 3,300 in 2004 to about 1,350 at year-end 2011. We have identified plans that will take us to about 850 suppliers in the near- to mid-term, with a further reduction to about 750 targeted, and we are confident that our consolidation efforts will result in a stronger and healthier supply base. We also are working closely with our suppliers to address any near-term capacity constraints as we continue to ramp up production. In addition, our move to global vehicle platforms increases our ability to source to common suppliers for the total global volume of vehicle components resulting in a smaller number of suppliers receiving a greater volume of purchases to support our global vehicle platforms and allowing us to gain greater economies of scale.

Ford and Lincoln Dealerships. Our dealers are a source of strength in North America and around the world, representing the face of Ford to local communities. Our goal is to achieve a sustainable and profitable dealer network by rightsizing the number of dealerships, identifying the right locations, and ensuring the appropriate branded facilities to satisfy current and future demand. We are adding dealerships rapidly in markets in our Asia Pacific Africa region where industry volume is growing at a rapid pace. Our total dealership network in China is about 400, and about 150 dealerships in India. We have plans to continue our expansion of these networks, in addition to the dealership networks in our growth markets of Brazil and Russia. We also continue to work with our dealers in the United States to rightsize the number of Ford and Lincoln outlets, particularly in our largest 130 metropolitan markets. As part of these efforts, we have reduced the number of outlets in our U.S. Ford and Lincoln network from about 4,400 at the end of 2005 to about 3,340 at the end of 2011. We believe our U.S. dealers are positioned to profitably grow business in 2012, as they invest in their facilities, employees, and communities while continuously striving to improve the experience of retail customers. As previously announced, we discontinued the Mercury brand as of December 31, 2010, and we have successfully resolved Mercury franchise agreements for 99% of Mercury franchise holders.

Product Development. Our One Ford global product development system is fully operationalized, utilizing global platforms to deliver customer-focused programs rapidly and efficiently across multiple markets. Through our hub and spoke approach, one lead product development engineering center - the hub - is assigned for each global vehicle line, thereby ensuring global scale and efficiency through common designs, parts, suppliers, and manufacturing processes.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The hubs are supported by regional engineering centers - spokes - which also help deliver products tuned to local market customer preferences while maintaining global design DNA. Typical delivery metrics for global programs include 80% part commonality, 75% pre-sourcing to global suppliers, and 100% common manufacturing and assembly process.

Developments underway that underscore the progress of our One Ford global product development system implementation include, by mid-decade:


•	B-segment platform (Fiesta, B-MAX, EcoSport, etc.) providing an annual platform volume of greater than 2 million units with common design and manufacturing across applicable markets


•	C-segment platform (Focus, C-MAX, Escape, Kuga, etc.) leveraging greater than 2 million units annually with our widest range of regionally-tuned "top hats" across all global markets


•	Recently announced global CD-segment platform achieving ongoing annual volume of 1 million units, including Fusion and Mondeo, along with additional vehicles to be introduced over time


•	Compact truck (global Ranger pick-up) annual platform volume exceeding 275,000, and commercial van platform (E-Series and Transit) with annual volume exceeding 470,000

The efficiency and flexibility gains enabled by our One Ford plan will allow us to increase our overall volume across all platforms threefold between 2010 and 2016. By 2013, more than 85% of our global volume will be on nine core platforms. Also by 2013, we will have common small- and medium-sized Ford vehicles in North America, South America, Europe, and Asia Pacific Africa.

Accelerate Development of New Products Our Customers Want and Value

We are committed to introducing new products that consumers want and value, and we are receiving very positive reactions from consumers, media, and independent evaluators in response to the products we have introduced in recent years. We will continue to build on this strength in 2012 - beginning with the favorable reactions to our 2013 model year Ford Escape, introduced at the Los Angeles Auto Show in November 2011, followed by the 2013 model year Ford Fusion introduced at the 2012 North American International Auto Show ("NAIAS"), which won Autoweek magazine's best in show award.

Our global product strategy is to serve our key geographic markets with a complete family of small, medium, and large, cars, utilities, and trucks that have best-in-class design and quality, are environmentally responsible, and contain high-value feature content. The result of this strategy is a full-line of vehicles that:


•	Have bold, emotive exterior designs


•	Are great to drive


•	Are great to sit in (with the comfort and convenience of a second home on wheels and exceptional quietness)


•	Provide fuel economy as a reason to buy


•	Are unmistakably a Ford or Lincoln in look, sound and feel


•	Provide exceptional value

We plan to continue leadership in delivering the freshest showrooms in all regions, achieving a global refresh rate of 1.7 times (ranging from 1.5 in Ford North America and Ford Europe to 2.2 in Ford South America) between 2011 and 2016 - all with benchmark product development efficiency.

Additionally, we have renewed our commitment to the Lincoln brand. We know that transitioning Lincoln to a world-class luxury brand requires a transformational shift in product execution and ownership experience. As evident in the Lincoln MKZ Concept revealed at the 2012 NAIAS, our Lincoln product strategy will deliver:


•	Uniquely Lincoln vehicles, inside and out - built on our core platforms leveraging global scale and efficiencies


•	Design excellence that is stunning and understated, with premium amenities offered on every nameplate


•	Product excellence that is enabled by class-leading technologies


•	The "right" balance of customer-relevant features in a unique experience that is guided by Lincoln DNA

Starting this year, we will have seven new or significantly refreshed Lincoln products by 2015.

Developing products our customers want and value for Ford and Lincoln demands consistent focus on the four pillars of our global product strategy - Drive Quality, Drive Green, Drive Safe, and Drive Smart.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Drive Quality. We have made significant strides in recent years to achieve world class levels of quality and desirability. This has been accomplished by following an established, global set of disciplined, standardized processes that are aimed at making us the world's leader in automotive quality. Via our common global management team, we are leveraging our assets by eliminating duplication, implementing best practices, and utilizing a systematic approach to quality. This integrated approach is apparent in the recently-launched Ford Fiesta and Focus, which truly are global products earning high customer satisfaction levels. External inputs are confirming our internal assessment, with the Fiesta labeled the most appealing sub-compact car in the JD Power and Associates APEAL study in 2011. The Ford F-150 won in its segment as well. The F-150 shines again with the best initial quality in its segment, while the Taurus also received an award in the JD Power and Associates Initial Quality Study. For overall dependability, JD Power and Associates ranked the Fusion and Mustang, and the Lincoln MKZ and Navigator, as the most dependable vehicles in their respective segments. The Lincoln brand led all brands as the most dependable sold in the United States. The cumulative effect of our disciplined global quality standards has been improved quality and owner satisfaction. For example, our global repair rates at three months in service have decreased by over 56% since 2005. Going forward, we expect our global processes to lead to ongoing continuous improvement.

We are committed to providing leading edge technologies customers want and value, including MyFord Touch, which increasingly is playing a pivotal role in defining the future of automotive interiors and enhancing convenience, safety, and overall driving experience across a wide range of vehicles. Since MyFord Touch launched last fall, we have held four customer clinics in which hundreds of owners have spoken directly with Ford engineers about their experiences with the new technology. Owner feedback was clear and consistent, revealing that MyFord Touch was a key purchase factor. Our customers also highlighted that MyFord Touch could be faster and feature simpler graphics that are easier to use. While owners reported that they loved the system, there were distinct areas in which they wanted improvements. Earlier this year, we began delivering on their requests, starting with more detailed instructions and information on how best to utilize the capabilities of the system. Moreover, we have worked on a broad set of performance upgrades to the system for rollout in 2012 which will enhance the ownership experience based on customer feedback.

Drive Green. Our commitment to sustainability relies on a balanced approach, both in application of fuel economy technology as well as breadth of offerings. We are focusing on advancing conventional vehicle technology that touches millions of new vehicles each year and provides affordable fuel economy to the masses. At the same time, we are developing next-generation propulsion systems that represent an important part of the long-term future for the industry.

We remain committed to our goal to deliver leadership or among the best fuel efficiency in every major new vehicle launch. Nearly one-third of Ford's vehicle lines will feature a model with 40 mpg or more in 2012 - a claim no other full-line automaker can match. Additionally, the 2013 model year Fusion is projected to deliver the best-in-class fuel economy in any of three powertrains -- gas, hybrid, and plug-in hybrid.

The implementation of our EcoBoost^® family of gasoline engines is well established and a major part of our sustainability strategy, delivering both exceptional fuel economy and performance. By combining direct fuel-injection and turbo charging, the EcoBoost engine can deliver up to 20% better fuel economy and up to 15% fewer CO₂ emissions versus larger-displacement engines, without sacrificing driving performance. The 3.5-liter EcoBoost V6 engine was introduced in 2009 and now is available in the Lincoln MKS and MKT and the Ford Taurus SHO, Flex, F-150, and will be in the two new Police Interceptors. The F-150 V6 line-up has exceeded expectations with EcoBoost - a major reason V6 sales have grown to over 50% of F-150 retail sales.

The 2.0-liter I4 EcoBoost was launched in 2010 in Europe with the Ford Mondeo, S-MAX, and Galaxy. In 2011, the 2.0-liter EcoBoost made its North American debut in the Explorer and Edge as well as Falcon in Australia, and is planned for the 2013 model year Focus ST, Escape, Fusion, and Taurus. The 2.0-liter Mondeo also was the first EcoBoost introduced in China, with follow-on introductions on the way. The 1.6-liter I4 EcoBoost launched in Europe in 2010 with the Focus, C-MAX, Grand C-MAX, Mondeo, S-MAX, and Galaxy and is planned for Focus in Australia, as well as Escape and Fusion in North America. Additionally, an all-new, fuel-efficient 1.0-liter I3 EcoBoost engine is planned to debut in the all-new EcoSport for India, and will be available in the B-MAX, C-MAX, and European Focus. In North America, over time we plan to triple the production of EcoBoost-equipped vehicles. By 2013, annual global production of EcoBoost vehicles is expected to reach 1.5 million units.

In Asia Pacific Africa, EcoBoost - along with other innovative global technologies such as the advanced 6-speed PowerShift™ and automatic transmissions - is a major part of our plan to deliver fuel efficiency improvement of up to 20% across our product lineup by the end of 2012 compared with 2008. For example, in Australia we introduced in 2011 an advanced liquid-injection petroleum gas ("LPG") system for the Ford Falcon, providing customers with the most advanced LPG technology on the market.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our European ECOnetic^®range of ultra-low CO₂ diesel models across small to mid-size car and commercial vehicle segments continues to build on the success begun with the 2008 Focus ECOnetic. In 2012, we will launch the Focus ECOnetic with further advanced technology including stop-start capability to reduce CO₂ emissions to a segment-leading 89 g/km, and the Fiesta ECOnetic at 87 g/km. In 2011, the Mondeo ECOnetic provided customers with a mid-sized car with low CO₂ emissions of 114 g/km.

In South America, we will transition our top hat and powertrain offerings to 100% global products within three years. For example, in 2012 we will launch a variety of engine technologies, including high-tech naturally-aspirated engines, 100% ethanol ("E100"), EcoBoost, and hybrid electric ("HEV"). Additionally, we will provide small, medium, and large diesel engines to improve fuel efficiency of our products.

We also are pursuing an aggressive electrification vehicle strategy called "Power of Choice." We are adding electric vehicle versions to existing, traditional vehicle lines, rather than creating one specific electric vehicle model. Our approach will enable us to offer a broad portfolio of electric vehicles at affordable prices, leveraging the efficiency of scale through the entire vehicle line. With Power of Choice, customers will be able to choose from a variety of electric powertrains, including:


•	Hybrid Electric Vehicles - powered in part by a battery and in part by an internal combustion engine, depending on driving conditions, with on-board charging of the battery (e.g., Ford Fusion Hybrid and Lincoln MKZ Hybrid currently available in North America)


•	Plug-in HEVs - similar to a hybrid vehicle, but with a larger battery to provide more electric power in more driving conditions, with the battery capable of being charged externally (e.g., Ford C-MAX Energi to be launched in North America in 2012 and Europe in 2013, and Fusion Energi to be launched in North America in 2012)


•	Battery-Electric Vehicle ("BEV") - powered solely by battery, with no internal combustion engine, with the battery charged externally (e.g., Ford Transit Connect BEV launched in North America in 2010 and in Europe in 2011, and Focus Electric BEV launched in North America in 2011 and to be launched in Europe in 2012).

We continue to engage in a number of collaborative agreements to address the many challenges that remain for electrified transportation including battery development, component standardization, cost, electric infrastructure, and connectivity to the national power grid. For example, we have signed a memorandum of understanding with Toyota to study potential collaboration to develop rear wheel drive truck and sport utility vehicle HEV technology. This collaboration is expected to enable a cost-efficient solution for maintaining our truck fuel economy leadership going forward.

Drive Safe. We are building on our record of having the most U.S. government 5-star rated vehicles by expanding both advanced crash protection and crash avoidance technology. We are strengthening our safety leadership by focusing on three key areas - addressing driver behavior, enhancing crash protection even further, and pioneering the next frontier of safety with driver-assist crash-avoidance technologies. For example, we introduced MyKey^®to help parents encourage teenagers to drive more safely and more fuel-efficiently, and to increase safety belt usage. MyKey - which debuted on the 2010 Focus and quickly has become standard on most Ford and Lincoln models - allows owners to program a key that can limit the vehicle's top speed, limit the audio volume, and mute the audio if the front seat occupants are not buckled-up. We also are the leader in another dimension of driver behavior - enabling drivers to more safely operate vehicles during the recent years in which we've seen a sharp growth in the number of personal electronic devices (e.g., cell phones, MP3 players, etc.). Our SYNC system provides hands-free connectivity, with more than 4 million SYNC units on the road, and our 2^nd generation of SYNC has added a "Do Not Disturb" feature that allows users to redirect incoming messages and calls directly to the customer's cellular mail box.

We also offer a new advanced crash-avoidance technology - Collision Warning with Brake Support - on several Ford and Lincoln vehicles including Ford Taurus, Edge, and Explorer, and Lincoln MKS, MKX, and MKT. This feature uses radar to monitor traffic directly ahead, and warns the driver with an authoritative beep and a red warning light projected on the windshield if a collision threat is detected. The all-new 2011 Explorer also debuted the auto industry's first-ever production use of inflatable seat belts, designed to provide additional protection for rear-seat occupants - often children and older passengers who can be more vulnerable to head, chest, and neck injuries. This technology was incorporated into the 2013 model year Ford Flex and Lincoln MKT, and we plan to expand further offerings to other vehicles globally.

Other global driver-assist features such as Blind Spot Information System™, Active Park Assist, and Adaptive Cruise Control have enjoyed strong customer demand and expanded vehicle applications. We also have begun offering the next suite of new safety features and driver assistance technologies -- we will introduce Lane Keeping Aid and Driver Alert on the 2013 model year Lincoln MKS and MKT, and Ford Flex, Explorer, Fusion, Mondeo and the Focus in Europe.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The independent car safety organization Euro NCAP named the new Focus Europe's "Best in Class" small family car, while the Focus also became the industry's first vehicle to earn four Euro NCAP Advanced Technology Awards, being recognized for Active City Stop, Lane Keeping Aid, Driver Alert, and Forward Alert. Features such as Speed Limiter, Torque Vectoring Control, Traffic Sign Recognition System, All-Seat Beltminder^®,and Power Child Locks also have been introduced in Europe on the Focus, C-MAX, Grand C-MAX, Mondeo, S-MAX, and Galaxy.

Drive Smart. We recently earned our fourth consecutive invitation to participate in the International Consumer Electronics Show ("CES"). At the 2011 show, Mr. Mulally introduced the Focus BEV and our entry into the growing smart phone-to-vehicle connectivity movement with MyFord Mobile™. MyFord Mobile provides BEV customers with unprecedented levels of mobile access to important elements of the BEV ownership experience like charge status, range, and route planning, and convenience features like remote locking and unlocking of doors. At the 2012 show, we introduced the Ford EVOS Concept to North America for the first time. The EVOS Concept showcases a dramatic four-door, four-seat fastback concept with state-of-the-art lithium-ion plug-in hybrid powertrain that previews our first truly global design language and a new vision for customer-focused intuitive technologies. Driver engagement technologies explore seamless enhancement of the driving experience and smart, electrified powertrain. Technologies use online data to check for potential travel routes and to set the most efficient braking, steering, and suspension settings with efficient and enjoyable powertrain settings, and to reserve a charging parking spot at the driver's destination. We built on our momentum by showcasing as well the Fusion Energi - a new plug-in hybrid that is expected to deliver more than 100 MPGe (miles per gallon equivalent) when driving on plug-in battery power - which was named "Official Car of CES."

Building upon our demonstrated strategy to democratize globally our technology, our new Hands Free Liftgate is being introduced on the all-new 2013 model year Escape, and will be rolled out to select vehicles over time. With the vehicle's key fob in a purse or pocket, the Hands Free Liftgate allows the owner simply to use his/her leg to motion under the liftgate to trigger the power liftgate to open. Parents and active people of all ages will find the feature especially useful. Additionally, the 2013 model year MKS introduces the Lincoln Drive Control system that allows the driver to modify the on-road "personality" of the vehicle, thereby delivering the ideal balance of smooth ride with confident handling. By moving the gear selector from Drive to Sport, the vehicle automatically changes shift performance, ride firmness, throttle response, shift schedule, steering response and traction control/electronic stability control parameters.

We also announced at CES our plan to create and open in the first quarter of 2012 our first dedicated research lab in California's Silicon Valley. This new lab will help us keep pace with consumer trends and aggressively prepare for the future by developing mobility solutions to harness the power of seamless connectivity, sensing systems, cloud computing, and clean technology, furthering our commitment to make technology affordable for millions of consumers.

Leveraging key new technologies across the four strategy pillars in multiple regions on global programs drives tremendous scale and efficiency savings that can be re-invested, allowing us to have the freshest showroom in the industry. In 2011, we launched 28 new or redesigned vehicles in key markets around the world, including the redesigned Focus globally; in North America, the 2.0-liter EcoBoost engine in the Ford Explorer and Edge, and the 3.5-liter EcoBoost in the F-150; in Europe, the new Transit Connect BEV and global Ranger; and in Asia Pacific Africa, the new Fiesta and global Ranger.

Our aggressive freshening cadence and relentless focus on efficiency is producing results that are greater than our major global full-line competitors. Our global programs continue to offer bold, emotive designs, high levels of quality, fuel economy leadership, top safety ratings, innovative technologies, and greater feature content than higher-series competitive offerings that also will allow us to reduce brand discounts and increase revenue across our portfolio. This overall combination of cost efficiency and revenue enhancement that is being realized from One Ford and our global product strategy will help us continue to profitably grow and "Go Further."

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Finance Our Plan and Strengthen Our Balance Sheet

As discussed in more detail in "Liquidity and Capital Resources" below, during 2011 we generated positive Automotive operating-related cash flow of $5.6 billion. We reduced Automotive debt substantially in recent years, and significantly improved our net cash/(debt) position, as shown below (in billions):



	December 31, 2011		December 31, 2010		December 31, 2009
Automotive gross cash	$	22.9	$	20.5	$	24.9
Less debt:
Revolving line of credit	—		0.8		7.5
VEBA debt	—		—		7.0
Unsecured convertible notes	0.7		0.7		2.6
Term loan	—		4.1		5.3
U.S. Dept. of Energy loans for advanced technology manufacturing/EXIM	5.0		3.0		1.2
All other debt	7.4		10.5		10.0
Total debt	13.1		19.1		33.6
Net cash/(debt)	$	9.8	$	1.4	$	(8.7	)

Work Together Effectively as One Team

As part of the One Team approach, we have implemented a disciplined business plan process to regularly review our business environment, risks and opportunities, strategy, and plan, and to identify areas of our plan that need special attention while pursuing opportunities to improve our plan. Everyone is included and contributes, openness is encouraged, our leaders are responsible and accountable, we use facts and data to make our decisions, high performance teamwork is a performance criteria - and we follow this process every week, every month, and every quarter, driving continuous improvement. We believe this process gives us a clear picture of our business in real time and the ability to respond quickly and decisively to new issues and changing conditions - as we have done in the face of rapid changes in the market and business environment in the last few years. As needed, we convene daily management meetings to handle potentially acute situations, such as the aftermath of natural disasters in Asia Pacific. This allows us to ensure that we are vigorously managing daily developments and moving decisively in response to changing conditions.

In addition, we are partnering with and enlisting all of our stakeholders to help us execute our plan to deal with our business realities and create an exciting and viable Ford business going forward. We are reaching out and listening to customers, dealers, employees, the UAW, suppliers, investors, communities, retirees, and federal, state and local governments. Each of these constituencies is a critical part of the success of our business going forward. Realizing our goal of profitable growth for all is as important to these stakeholders as it is to our shareholders.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

RESULTS OF OPERATIONS

TOTAL COMPANY

Our net income attributable to Ford Motor Company was $20.2 billion or $4.94 per share of Common and Class B Stock in 2011, an improvement of $13.6 billion from net income attributable to Ford Motor Company of $6.6 billion or $1.66 per share of Common and Class B Stock in 2010.

Total Company results are shown below:



	2011			2010			2009
	(Mils.)			(Mils.)			(Mils.)
Income/(Loss)
Pre-tax results (excl. special items)	$	8,763		$	8,300		$	38
Special items	(82		)	(1,151		)	2,561
Pre-tax results (incl. special items)	8,681			7,149			2,599
(Provision for)/Benefit from income taxes	11,541			(592		)	113
Income from continuing operations	20,222			6,557			2,712
Income/(Loss) from discontinued operations	—			—			5
Net income/(loss)	20,222			6,557			2,717
Less: Income/(Loss) attributable to noncontrolling interests	9			(4		)	—
Net income/(loss) attributable to Ford	$	20,213		$	6,561		$	2,717

Income/(Loss) before income taxes includes certain items ("special items") that we have grouped into "Personnel and Dealer-Related Items" and "Other Items" to provide useful information to investors about the nature of the special items. The first category includes items related to our efforts to match production capacity and cost structure to market demand and changing model mix and therefore helps investors track amounts related to those activities. The second category includes items that we do not generally consider to be indicative of our ongoing operating activities, and therefore allows investors analyzing our pre-tax results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results.

As detailed in Note 27 of the Notes to the Financial Statements, we allocate all Automotive sector and Financial Services sector special items to a separate reconciling item, as opposed to allocating them among the operating segments and Other Automotive, reflecting the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources among the segments.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table details Automotive sector special items in each category:



	2011			2010	2009
	(Mils.)			(Mils.)	(Mils.)
Personnel and Dealer-Related Items
Automotive Sector
Personnel-reduction actions	$	(269	)