Current Financial Health

In recent years, these pages of our Sustainability Report focused on disappointing financial results and our necessary efforts to sustain our business through workforce reductions and streamlined manufacturing. As painful as that process was – and as painful as it remains for those whose jobs were eliminated – it is essential to note that we did not “downsize” our operations as much as we “rightsized” our business. We minimized overcapacity and reduced inefficiencies, resulting in a leaner, but stronger, Ford Motor Company. This positions us to continue the profitable growth we have reported over the past two years so that all stakeholders can benefit from the Company’s success.

Prior to our reorganization, we were a company that was global in name only. Today, we operate on a truly global platform, building vehicles that can be adapted for specific regional needs. For example, about 80 percent of the auto parts on our new global Ford Focus are the same around the world; the remaining 20 percent varies to allow for customer flexibility and choice. Flexible manufacturing capabilities enable us to bring products to market with greater speed and greater efficiency than ever before.

The fundamental restructuring of our operations impacted every part of our business – from product innovation and fuel efficiency to labor relations and our interactions with suppliers and dealers. This restructuring helped earn us a “Business Turnaround of the Year” award from the 2010 American Business Awards, which are judged by more than 200 executives from across the U.S. The award recognized our efforts to turn the corner during 2009 in the face of a global economic and financial crisis, as well as unprecedented events in the U.S. automotive industry.

We continued to strengthen our balance sheet in 2010, reducing our Automotive debt by $14.5 billion as we strengthened our business. This included the full $7 billion prepayment of our debt obligations under the Voluntary Employee Beneficiary Association, an independent health care trust established as part of collective bargaining between Ford and the UAW.

We remain committed to aligning production with demand. In many cases, this has meant retooling facilities that previously built large trucks and SUVs to instead manufacture smaller, more energy-efficient vehicles. In 2010, we announced more than $9 billion in global investments for future growth, including $4.5 billion in North and South America, $2.9 billion in Europe and $1.7 billion in our Asia Pacific and Africa region. In early 2011, we announced plans to invest $400 million to support new vehicle production at our Kansas City (Missouri) Assembly Plant, reinforcing our commitment to U.S. manufacturing and American jobs.

Our improved financial performance has allowed us to grow our workforce after several years of painful reductions. We have announced plans to add 7,000 new hourly and salaried jobs in the U.S. between 2011 and 2012. We also have been able to bring more hourly jobs (those that were previously performed by suppliers) in-house, exceeding our commitments in UAW collective bargaining. (For more on our workforce, see the Society section of this report.)

Our financial results also generated tangible employee benefits in 2010. We were able to pay profit sharing to approximately 40,600 eligible U.S. hourly employees, for example. We reinstated a 401(k) matching program and awarded 2010 merit increases for our U.S. salaried employees. We also awarded bonuses and profit sharing for U.S. employees in 2011; however, as part of our ongoing commitment to maintaining a competitive cost structure, we did not award merit increases for the year.

We expect continued financial progress, driven primarily by our growing product strength, a gradually strengthening global economy and an unrelenting focus on improving the competitiveness of our operations.

Ending Mercury Production

A decade ago, Ford Motor Company was made up of eight brands. Today, we have just two, allowing us to focus all of our attention on our Ford and Lincoln brands. In 2010, we ended production of our Mercury brand. Mercury originally was created as a premium offering to Ford and was an important source of incremental sales. However, as the Ford brand grew in strength – particularly during the last three years – many Mercury customers migrated to Ford, and Mercury’s incremental sales were declining as Ford sales increased.

At the time of our announcement, there were no stand-alone Mercury dealerships in North America. We worked closely with our dealers to help them sell their remaining Mercury inventory.