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FORM 10-K

313-322-3000

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

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

        Indicate by check mark whether 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   ü        No     

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.   þ  

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes   ü        No     

        As of June 30, 2004, Ford had outstanding 1,760,050,800 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 ($15.65 a share), the aggregate market value of such Common Stock was $27,544,795,020. 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, 2004 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 12, 2005 (our “Proxy Statement”), which is incorporated by reference under various Items of this Report.

        As of February 24, 2005, Ford had outstanding 1,760,048,400 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 ($12.80 a share), the aggregate market value of such Common Stock was $22,528,619,520.

DOCUMENT INCORPORATED BY REFERENCE*

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

PART I

      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, 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 combined. We and our subsidiaries also engage in other businesses, including financing and renting vehicles and equipment.

      In addition to the information about Ford and its subsidiaries contained in this Report, extensive information about our Company can be found throughout our website located at www.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, our Code of Ethics for Senior Financial Personnel, our Code of Ethics for Directors, our Standards of Corporate Conduct for all employees, and the Charters for each of our Board Committees. In addition, amendments to, and waivers granted to our directors and executive officers under, our Codes of Ethics, if any, will be posted in this area of our website. These corporate governance documents can be accessed by logging onto our web site and clicking on the “Corporate Governance” link.

      You will then see a list of corporate governance documents. Click on the document you desire to access. In addition, printed versions of our Corporate Governance Principles, our Code of Ethics for Senior Financial Personnel, our Standards of Corporate Conduct and the Charters for each of our Board Committees can 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 to the Company information discussed above provided on our website, all of our 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 made available, free of charge, through our website, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to those reports. Also, each Section 16 filing made with the SEC by the Company or any of its executive officers or directors with respect to our common stock are made available, free of charge, through our website. The periodic reports and amendments and the Section 16 filings are available through our website as soon as reasonably practicable after such report or amendment is electronically filed with the SEC.

      To access our SEC reports or amendments or the Section 16 filings, log onto our website and click on the following link on each successive screen.

	•	“Investor Information”
	•	“Company Reports”
	•	“U.S. S.E.C. EDGAR”
	•	“Click here to continue to view SEC Filings”

You will then see a list of reports filed with the SEC. Click on the report you desire to access.

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

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OVERVIEW

      Segments. Our business is divided into two business sectors: the Automotive sector and the Financial Services sector. Segment selection is based upon 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.

      Beginning with the second quarter of 2004, we changed the reporting of our Automotive sector from two segments (previously “Americas” and “International”) to three segments: “The Americas”, “Ford Europe and PAG”, and “Ford Asia Pacific and Africa/ Mazda”. Our Automotive and Financial Services segments are described in the table below.

      We provide financial information (such as revenues, income, and assets) for each of these business sectors and operating segments 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”, and (3) Note 23 of the Notes to the Financial Statements located at the end of this Report. Financial information relating to certain geographic areas also is included in these Notes.

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AUTOMOTIVE SECTOR

General

      We sell cars and trucks throughout the world. In 2004, we sold approximately 6,798,000 vehicles throughout the world. Our automotive vehicle brands include Ford, Mercury, Lincoln, Volvo, Land Rover, Jaguar and Aston Martin.

      Substantially all of our cars, trucks and parts are marketed through retail dealers in North America, and through distributors and dealers outside of North America. At December 31, 2004, the approximate number of dealers and distributors worldwide distributing our vehicle brands was as follows:

*	Because many of these dealerships distribute more than one of our brands from the same sales location, a single dealership may be counted under more than one brand.

     In addition to the products we sell to our dealers for retail sale, we also sell cars and trucks to our dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Sales to all of our fleet customers in the United States in the aggregate have represented between 22% and 24% of our total U.S. car and truck sales for the last five years. 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.

      In addition to producing and selling cars and trucks, we also provide retail customers with a wide range of after-the-sale vehicle services and products through our dealer network, in areas such as maintenance and light repair, heavy repair, collision, vehicle accessories and extended service warranty. In North America, we market these products and services under several brands including Genuine Ford and Lincoln-Mercury Parts and Service^SM, Ford Extended Service Plan^SM, and Motorcraft^SM.

      The worldwide automotive industry, Ford included, is affected significantly by a number of factors over which we have little control, including general economic conditions. The automotive industry is a highly competitive, cyclical business that has a wide variety of product offerings. The number of cars and trucks sold (commonly referred to as “industry demand”) could vary substantially from year to year. In any year, industry demand depends largely on general economic conditions, the cost of purchasing and operating cars and trucks, and the availability and cost of credit and fuel. Industry demand also reflects the fact that cars and trucks are durable items that people generally can wait to replace.

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

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      The profitability of vehicle sales is affected by many factors, including the following:

	•	unit sales volume;
	•	the mix of vehicles and options sold;
	•	the margin of profit on each vehicle sold;
	•	the level of “incentives” (price discounts) and other marketing costs;
	•	the costs for customer warranty claims and additional service actions; and
	•	the costs for safety, emission and fuel economy technology and equipment.

Further, because Ford and other manufacturers have a high proportion of costs that are relatively fixed (including labor costs), small changes in unit sales volumes can significantly affect overall profitability.

      In addition, the automobile industry continues to face a very competitive pricing environment, driven in part by industry excess capacity. For the past several decades, manufacturers typically have given price discounts and other marketing incentives to purchasers to maintain their market shares and production levels. A discussion of our strategies to compete in this pricing environment is set forth below in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”.

      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. Detailed information regarding our competitive position in the principal markets where we compete can be found below as part of the overall discussion of the automotive industry in those markets.

      Seasonality. We generally record the sale of a vehicle (and recognize sales proceeds in revenue) when it is produced and shipped to our customer (i.e., our dealer or distributor). We manage our vehicle production schedule based on a number of factors, including dealer stock levels (i.e., number of units held in inventory by our dealers and distributors for sale to retail and fleet customers) and retail sales (i.e., units sold by our dealers and distributors to their customers at retail). We experience some fluctuation in the business of a seasonal nature, generally in the second and third quarters, primarily as the result of the summer vacation shutdown of our manufacturing facilities during the third quarter. Typically, production is higher in the second quarter in anticipation of the shutdown and lower in the third quarter due to the downtime. As a result, operating results for the third quarter typically are less favorable than those of the other quarters.

      Raw Materials. We purchase a wide variety of raw materials for use in the production of our vehicles from numerous suppliers around the world. These raw materials include non-ferrous metals (e.g., aluminum), precious metals (e.g., palladium), ferrous metals (e.g., steel and iron castings), energy (e.g., natural gas) and resins (e.g., polypropylene). We believe that we have adequate supplies or sources of availability of the raw materials necessary to meet our needs. However, there are risks and uncertainties with respect to the supply of certain of these raw materials that could impact their availability in sufficient quantities to meet our needs. See Item 7. “Management Discussion and Analysis of Financial Condition and Results of Operations — Overview” for a discussion of commodity price trends.

      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

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methods, filing U.S. and international patent applications to protect technology and improvements that we consider important to the development of our business. As such, we have generated a large number of patents related to the operation of our business and expect this portfolio to continue to grow as we actively pursue additional technological innovation. We currently have approximately 11,000 active patents and pending patent applications globally, with an average age for patents in our active patent portfolio being 5 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. While we believe these patents, patent applications and know-how, in the aggregate, to be 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. Similarly, we 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, the loss of which could have a material adverse effect on our business.

United States

      Sales Data. The following table shows U.S. industry sales of cars and trucks for the years indicated:

      We classify cars by small, medium, large and premium segments and trucks by compact pickup, bus/van (including minivans), full-size pickup, sport utility vehicles and medium/heavy segments. However, with the introduction of crossover vehicles, the distinction between traditional cars and trucks has become more difficult to draw and these vehicles are not consistently classified as either by the various manufacturers. In the tables above and below, we have classified crossover vehicles as sport utility vehicles. We also have classified as “premium” cars all of our luxury cars, regardless of size. The term “bus” as used in this discussion refers to vans designed to carry passengers. Annually, we conduct a comprehensive review of many factors to determine the appropriate classification of vehicle segments. This review may result in a change of classification of certain vehicles.

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      The following tables show the proportion of United States car and truck unit sales by segment for the industry (including both domestic and foreign-based manufacturers) and Ford (including all of our brands sold in the U.S.) for the years indicated:

      As the tables above indicate, there has been a general shift from cars to trucks for both industry sales and Ford sales. This shift has been occurring steadily over a number of years. Ford’s sales of trucks as a percentage of its total vehicle sales has also increased since 2000 because of higher sales of sport utility vehicles and full-size pickups.

      Market Share Data. Our principal competitors in the United States include General Motors Corporation, DaimlerChrysler Corporation, Toyota Corporation, and Honda Motor Corporation. The following tables show changes in car and truck United States market shares for Ford (including all of our brands sold in the U.S.) and the other four leading vehicle manufacturers for the years indicated.

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The percentages in each of the following tables represent the percentage of the combined car and truck industry.

*	All U.S. retail sales data are based on publicly available information from the media and trade publications.
**	Ford purchased Land Rover on June 30, 2000. The figures shown above include Land Rover data in Ford’s market share beginning July 1, 2000.
***	“All Other” includes primarily companies based in various European countries, Korea and other Japanese manufacturers and, with respect to the U.S. Truck Market Shares table and U.S. Combined Car and Truck Market Shares table, includes heavy truck manufacturers.

     The decline in overall market share for Ford since 2000 is primarily the result of increased competition and actions we have taken to improve our profitability, including the discontinuance of a number of vehicles (e.g., Ford Escort, Ford Explorer Sport, Mercury Cougar, Mercury Villager and Lincoln Continental), a continued focus on profitable commercial and government fleet sales and a planned reduction of low-margin sales to daily rental car companies.

      Fleet Sales. The sales data and market share information provided above include both retail and fleet sales. Fleet sales include sales to daily rental car companies, commercial fleet customers, leasing companies and governments. Fleet sales generally are less profitable than retail sales and,

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within the fleet sales category, sales to daily rental car companies generally are less profitable than sales to other fleet purchasers.

      The table below shows our fleet sales in the United States, and the amount of those sales as a percentage of our total United States car and truck sales, for the last five years.

      As the table above indicates, sales to daily rental car companies have declined for the fourth consecutive year. This decline reflects primarily the continued execution of our strategy to reduce sales to daily rental car companies in order to improve our overall profitability. Commercial and government fleet sales increased in 2004 after three years of broad weakness in these segments driven by difficult economic conditions.

      Warranty Coverage and Additional Service Actions. We presently provide warranty coverage for defects in factory-supplied materials and workmanship on all vehicles sold in the United States. The warranty coverage for Ford/ Mercury vehicles generally extends for 36 months or 36,000 miles (whichever occurs first) and covers components of the vehicle, including tires. The U.S. warranty coverage for luxury vehicles (Lincoln, Jaguar, Volvo and Land Rover) generally extends for 48 months or 50,000 miles (whichever occurs first). Warranty coverage for safety restraint systems (safety belts, air bags and related components) extends for 60 months or 50,000 miles (whichever occurs first), except on Volvo vehicles, which is 60 months/unlimited mileage. Also, corrosion damage resulting in perforation (holes) in body sheet metal panels is covered for 60 months/unlimited mileage, with 72 months/ unlimited mileage on Jaguar/ Land Rover products, 96 months/unlimited mileage on Volvo vehicles prior to the 2004 model year and 144 months/unlimited mileage on Volvo vehicles starting with the 2005 model year. In addition, the Federal Clean Air Act requires warranty coverage for 8 years or 80,000 miles (whichever occurs first) for emissions equipment (e.g., catalytic converter and powertrain control module) on most light-duty vehicles sold in the United States. As a result of these warranties, costs for warranty repairs can be substantial.

      In addition to the costs associated with the contractual 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.

      Estimated warranty costs and additional service action costs for each vehicle sold by us are accrued at the time of sale. Accruals for estimated warranty costs and additional service action costs are subject to adjustment from time to time depending on actual experience.

      For additional information with respect to costs for warranty and additional service actions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Note 26 of the Notes to the Financial Statements.

Europe

      Market Share Information. Outside of the United States, Europe is our largest market for the sale of cars and trucks. We consider Europe to consist of the following 19 markets: Britain, Germany, France, Italy, Spain, Austria, Belgium, Ireland, Netherlands, Portugal, Switzerland, Finland,

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Sweden, Denmark, Norway, Czech Republic, Greece, Hungary and Poland. The automotive industry in Europe is intensely competitive. Our principal competitors in Europe include General Motors Corporation, Volkswagen A.G. Group, PSA Group, Renault Group and Fiat SpA. For the past 10 years, the top six manufacturers have collectively held between 69% and 74% of the total car market. This competitive environment is expected to intensify further as Japanese manufacturers increase their production capacity in Europe, and all of the other (non-Ford) manufacturers of premium brands (e.g., BMW, Mercedes Benz and Audi) continue to broaden their product offerings. For a discussion of improvement actions we have taken in our Ford Europe and PAG segment in 2003 and 2004, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”.

      In 2004, vehicle manufacturers sold approximately 17.6 million cars and trucks in Europe, up 2.6% from 2003 levels. Our combined car and truck market share in Europe (including all of our brands sold in Europe) in 2004 was 11.0%, up 0.3 percentage points from 2003.

      Britain and Germany are our most important markets within Europe, although the Southern European countries are becoming increasingly significant. Any adverse change in the British or German market has a significant effect on our total European automotive profits. For 2004 compared with 2003, total industry sales were up 0.5% in Britain and up 1.2% in Germany. Our combined car and truck market share in these markets (including all of our brands sold in these markets) in 2004 was 19.7% in Britain (the same as in the previous year) and 8.8% in Germany (up 0.2 percentage points from the previous year).

      Marketing Incentives. The automotive industry in Europe continues to be intensely competitive. In Europe in 2004, increased competition resulted in substantial retail and fleet incentive spending on the part of Ford and most manufacturers, particularly in our key European market of Britain. Similar to the United States, marketing costs in Europe include primarily (i) marketing incentives on vehicles, such as rebates and costs for special financing and lease programs, (ii) accruals for costs and/or losses associated with our required repurchase of certain vehicles sold to daily rental car companies, and (iii) costs for advertising and sales promotions for vehicles. We utilize revenue management strategies in Europe consistent with those in the United States. A discussion of our revenue management strategies is set forth below in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”.

      Motor Vehicle Distribution in Europe. On October 1, 2002, the Commission of the European Union (“Commission”) adopted a new regulation that changed the way motor vehicles are sold and repaired throughout the European Community (the “Block Exemption Regulation”). Under the Block Exemption Regulation, manufacturers had the choice to either operate an “exclusive” distribution system with exclusive dealer sales territories, but with the possibility of sales to any reseller (e.g., supermarket chains, internet agencies and other resellers not authorized by the manufacturer), who in turn could sell to end customers both within and outside of the dealer’s exclusive sales territory, or a “selective” distribution system.

      We, as well as the vast majority of the other automotive manufacturers, have elected to establish a “selective” distribution system, allowing us to restrict the dealer’s ability to sell our vehicles to unauthorized resellers. In addition, under the “selective” distribution system, we are entitled to determine the number of our dealers, but beginning in October 2005, not their location. Under either system, the new rules make it easier for a dealer to display and sell multiple brands in one store without the need to maintain separate facilities.

      Within this new regulation, the Commission also has adopted sweeping changes to the repair industry. Dealers can no longer be required by the manufacturer to perform repair work themselves. Instead, dealers can subcontract the work to independent repair shops that meet reasonable criteria set by the manufacturer. These authorized repair facilities can perform warranty and recall work, in

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addition to other repair and maintenance work. While a manufacturer can continue to require the use of its parts in warranty and recall work, the repair facility can use parts made by others that are of comparable quality for all other repair work. We have negotiated and implemented new Dealer, Authorized Repairer and Spare Part Supply contracts on a country-by-country level and, therefore, the Block Exemption Regulation now applies with respect to all of our dealers.

      With these new rules, the Commission intends to increase competition and narrow car price differences from country to country. While it remains difficult to quantify the full impact of these changes on our European operations, the Block Exemption Regulation continued to contribute to an increasingly competitive market for vehicles and parts. This has contributed to an increase in marketing expenses, thus negatively affecting the profitability of our Ford Europe and PAG segment. We anticipate that this trend may continue as dealers and parts suppliers become increasingly organized and established.

      Warranty Coverage and Additional Service Actions. Beginning in January 2002, warranty coverage provided by volume manufacturers (including Ford) in most of our European markets increased from one year with unlimited mileage to two years with unlimited mileage. This increase in warranty coverage was prompted by new consumer laws in eleven of our nineteen European markets that granted private buyers a two-year period in which to pursue defects in goods (including vehicles and substantial components). Prior to January 2002, Ford provided warranty coverage on Volvo brand (only in Britain) vehicles that extended for 36 months or 60,000 miles and will continue to provide such warranty coverage. In Britain, Ford provides a warranty package on Ford-brand vehicles that includes a 36 month warranty composed of a 12 month/unlimited mileage base warranty and free of charge OEW (Extended Service Plan) covering up to a further 24 months and 60,000 miles. Commercial vehicles (e.g., Ford Transit and Ford Transit Connect) carry a 24 month/unlimited mileage warranty except in Britain where Ford currently provides a 36 month/ 100,000 mile base warranty. In Britain, Jaguar and Land Rover provide 36 month/unlimited mileage warranty, enhanced in January 2002 to unlimited mileage from the previous 36 month/60,000 mile warranty. In mainland Europe, Jaguar provides 36 month/unlimited mileage warranty, enhanced in January 2002 to unlimited mileage from the previous 100,000 km limit; Land Rover provides 36 month/100,000 km warranty, enhanced in November 2001 from the previous 12 month warranty; and Volvo provides 24 month/unlimited mileage warranty. In addition to the base warranties discussed above, Ford warrants the bodywork of all of its brands against rust perforation for periods between 6 years and 12 years. As a result of these warranties, costs for warranty repairs can be substantial.

      In addition to the costs associated with the contractual 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.

      Estimated warranty costs and additional service action costs for each vehicle sold by us are accrued at the time of sale. Accruals for estimated warranty costs and additional service action costs are subject to adjustment from time to time depending on actual experience.

      For additional information with respect to costs for warranty and additional service actions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Note 26 of the Notes to the Financial Statements.

Other Markets

      Canada and Mexico. Canada and Mexico also are important markets for us. In Canada, industry sales of new cars and trucks in 2004 were approximately 1.57 million units, down 3.2% from 2003 levels. In 2004, industry sales of new cars and trucks in Mexico were approximately 1.12 million units, up 12.0% from 2003. Our combined car and truck market share in these markets (including all of our

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brands sold in these markets) in 2004 was 14.5% in Canada (down 1.3 percentage points from the previous year) and 16.5% in Mexico (about the same as the previous year).

     South America. Brazil and Argentina are our principal markets in South America. The economic environment in those countries has been volatile in recent years, particularly in 2002 and 2003, leading to large variations in industry sales. The 2004 results have been favorably influenced by improved economic conditions, political stability and government actions to reduce inflation and public deficits. Industry sales in 2004 were approximately 1.6 million units in Brazil, up about 10.6% from 2003, and approximately 280,000 units in Argentina, up 99% from 2003. Our combined car and truck market share in these markets (including all of our brands sold in these markets) in 2004 was 12.3% in Brazil (up 0.2 percentage points from the previous year) and 18.5% in Argentina (down 2.8 percentage points from the previous year).

      Asia Pacific. In the Asia Pacific region, Australia, Taiwan, Thailand and Japan are our principal markets. Details of the industry volumes and our combined car and truck market share for these countries (including all of our brands sold in a particular country) are shown below.

*	Our combined car and truck market share in Japan has been less than 1% in recent years.

     In addition, we own a 33.4% interest in Mazda Motor Corporation (“Mazda”) and account for Mazda on an equity basis. Mazda’s market share in Japan has been about 4.6% in recent years. Our principal competition in the Asia Pacific region has been the Japanese manufacturers. We anticipate that the ongoing relaxation of import restrictions (including duty reductions) will continue to intensify competition in the region.

      We began operations in India in 1999, launching an all-new small car (the Ikon) designed specifically for that market. In 2003 we launched the Endeavor, Ford’s first SUV in India, and we also launched the Fusion in late 2004. Our operations in India also sell components to other Ford affiliates.

      We also are in the process of increasing our presence in China. Changan Ford is our 50/50 joint venture operation with Chongqing Changan Automobile Co, Ltd. The Changan Ford assembly plant located in Chongqing became operational and began producing the Fiesta model in January 2003 and the Mondeo model in mid-2003. We have also announced that more than $1 billion would be invested over the next several years to expand manufacturing capacity, introduce new products and expand distribution channels in the Chinese automotive market. This investment will initially support the addition of new products and expansion of production capacity at Changan Ford in Chongqing from 50,000 units per year to 200,000 units per year. It will also support the establishment of a second assembly plant and a new engine plant to be located in Nanjing. In addition, we have a 30% interest in Jiangling Motors Corporation with operations located in Nanchang. We also import Jaguar, Volvo, Land Rover, and selected Ford vehicles into China. Also, during 2002, a new purchasing office was established in China to take advantage of sourcing opportunities for global markets from that country.

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FINANCIAL SERVICES SECTOR

Ford Motor Credit Company

      Ford Motor Credit Company (“Ford Credit”) offers a wide variety of automotive financial services to and through automotive dealers throughout the world. Ford Credit’s primary financial products fall into three categories:

	•	Retail financing — purchasing retail installment sale contracts and retail leases from dealers, and offering financing to commercial customers, primarily vehicle leasing companies and fleet purchasers, to purchase or lease vehicle fleets;
	•	Wholesale financing — making loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing; and
	•	Other financing — making loans to dealers for working capital, improvements to dealership facilities, and the acquisition and refinancing of dealership real estate.

      Ford Credit also services the finance receivables and leases it originates and purchases, makes loans to its affiliates, purchases certain receivables from us and our subsidiaries, and provides insurance services related to its financing programs. Ford Credit’s revenues are earned primarily from retail installment sale contracts and retail leases, including interest supplements and other support payments it receives from us on special-rate retail financing programs, from investment and other income related to sold receivables, and from payments made under wholesale and other dealer loan financing programs.

      Ford Credit does business in all 50 states of the United States through about 130 dealer automotive financing branches and seven regional service centers, and does business in all provinces in Canada through 14 dealer automotive financing branches and two regional service centers. Outside the United States, FCE Bank plc (“FCE”) is Ford Credit’s largest operation. FCE’s primary business is to support the sale of our vehicles in Europe through our dealer network. FCE offers a variety of retail, leasing and wholesale finance plans in most countries in which it operates. FCE does business in the United Kingdom, Germany and most other European countries. Ford Credit, through its subsidiaries, also operates in the Asia Pacific and Latin American regions. In addition, Ford Credit manages our vehicle financing operations in other countries where Ford Credit does not have operations.

      Ford Credit’s share of retail financing for new Ford, Lincoln and Mercury brand vehicles sold by dealers in the United States and new Ford-brand vehicles sold by dealers in Europe, and Ford Credit’s share of wholesale financing for new Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United States, excluding fleet, and of new Ford-brand vehicles acquired by dealers in Europe were as follows during the last three years:

      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 7. “Management’s

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Discussion and Analysis of Financial Condition and Results of Operations”. For a discussion of how Ford Credit manages its financial market risks, see Item 7A. “Quantitative and Qualitative Disclosure About Market Risk”.

     The predominant share of Ford Credit’s business consists of financing our vehicles and supporting our dealers. Any extended reduction or suspension of the production or sale of our vehicles due to a decline in consumer demand, work stoppage, governmental action, negative publicity or other event, or significant changes to marketing programs sponsored by us, would have an adverse effect on Ford Credit’s business.

      We sponsor special-rate financing programs available only through Ford Credit. Under these programs, we make interest supplement or other support payments to Ford Credit. These programs may increase Ford Credit’s financing volume and share of financing sales of our vehicles. See Note 1 of the Notes to the Financial Statements for more information about these support payments.

      Under a profit maintenance agreement with Ford Credit, we have agreed to make payments to maintain Ford Credit’s earnings at certain levels. In addition, under a support agreement with FCE, Ford Credit has agreed to maintain FCE’s net worth above a minimum level. No payments were made under either of these agreements during the 2002 through 2004 periods.

The Hertz Corporation

      The Hertz Corporation (“Hertz”), an indirect, wholly-owned subsidiary of Ford, and its affiliates, associates and independent licensees represent what we believe is the largest worldwide general use car rental brand based upon revenues. Hertz maintains a substantial network of company-owned car rental locations in the United States, Europe and other countries, and what we believe to be the largest number of on-airport car rental locations in the world, enabling Hertz to provide consistent quality, pricing and service worldwide. Hertz derives approximately 74% of its car rental revenues from on-airport locations. The Hertz #1 Club Gold® service provides an expedited rental service to members worldwide. Through its many travel industry relationships with airlines and hotels, Hertz has targeted the most frequent travelers to become Hertz #1 Club Gold® members.

      Hertz, through its wholly owned subsidiary, Hertz Equipment Rental Corporation (“HERC”), also operates one of the largest industrial and construction equipment rental businesses in North America based upon revenues and maintains a significant market share in the North American industrial and construction equipment rental market. HERC rents a broad range of earthmoving equipment, material handling equipment, aerial and electrical equipment, air compressors, pumps, small tools, compaction equipment and construction-related trucks.

      Other activities of Hertz include self-insurance operations for both its car rental and industrial and construction equipment rental businesses, the sale of its used cars and equipment and third-party claim management services.

      Hertz operates its businesses from over 7,200 locations throughout the United States and in over 150 foreign countries and jurisdictions.

      Below are some financial highlights for Hertz as consolidated in our Statement of Income (in millions):

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      A number of governmental standards and regulations relating to safety, corporate average fuel economy (“CAFE”), emissions control, noise control, damageability, 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 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. Such facilities also may be subject to comprehensive national, regional, and/or local permit programs with respect to such matters.

Mobile Source Emissions Control

      U.S. Requirements. The federal Clean Air Act imposes stringent limits on the amount of regulated pollutants that lawfully may be emitted by new motor vehicles and engines produced for sale in the United States. In 1999, the United States Environmental Protection Agency (“EPA”) promulgated post-2004 model year standards that were more stringent than the default standards contained in the Clean Air Act. These regulations require light-duty trucks and certain heavy-duty passenger-carrying trucks to meet the same emissions standards as passenger cars by the 2007 model year, and extend emissions durability requirements to 120,000 or 150,000 miles (depending on the specific standards to which the vehicle is certified). The stringency of these standards presents compliance challenges and is likely to hinder efforts to employ light-duty diesel technology, which could negatively impact our ability to meet CAFE standards. The EPA also promulgated post-2004 emission standards for “heavy-duty” trucks (8,500-14,000 lbs. gross vehicle weight), which are also likely to pose technological challenges.

      The EPA also is evaluating the need for new mobile source rules addressing a different group of pollutants called air toxics. The EPA is expected to issue a proposed rulemaking in 2005 that will probably lead to new standards; it is too early to determine what impact this will have on vehicle emission control systems. In addition, the EPA designated several new areas as ozone and/or particulate matter non-attainment areas, which may result in the EPA implementing even more stringent emission standards for vehicles in the 2009-2010 timeframe.

      Pursuant to the Clean Air Act, California has received a waiver from the EPA to establish its own unique emissions control standards. New vehicles and engines sold in California must be certified by the California Air Resources Board (“CARB”). CARB has adopted stringent vehicle emissions standards that began phasing in with the 2004 model year. These new standards treat most light-duty trucks the same as passenger cars, and require both types of vehicles to meet new stringent emissions requirements. As with the EPA’s post-2004 standards, CARB’s vehicle standards present a difficult engineering challenge, and will essentially rule out the use of light-duty diesel technology.

      Since 1990, the California program has included requirements for manufacturers to produce and deliver for sale zero-emission vehicles (“ZEVs”), which produce no emissions of regulated pollutants (typically battery-powered vehicles, which have had narrow consumer appeal due to their limited range, reduced functionality, and high cost). This ZEV mandate initially required that a specified percentage of each manufacturer’s vehicles produced for sale in California be ZEVs, beginning at 2% in 1998 and increasing to 10% in 2003. In 1996, CARB eliminated the ZEV mandate for the 1998-2002 model years, but retained the 10% mandate in a modified form beginning with the 2003 model year.

      In April 2003, CARB adopted new amendments to the ZEV mandate that shifted the near-term focus of the regulation away from battery-electric vehicles to advanced-technology vehicles (e.g., hybrid electric vehicles or natural gas vehicles) with extremely low tailpipe emissions. The rules

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also give some credit 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. In addition, the rules call on the auto industry to ramp up production of zero-emission fuel cell vehicles over the longer term. In the aggregate, the industry must produce 250 zero-emission fuel cell vehicles by the 2008 model year, and 2,500 more in the 2009-2011 model year period. A panel of independent experts will review the feasibility of these requirements in 2006. While the changes appear to reflect a recognition that battery-electric vehicles simply do not have the potential to achieve widespread customer acceptance, there are substantial questions about the feasibility of producing the required number of fuel-cell vehicles due to the substantial engineering challenges and high costs associated with this technology.

      The Clean Air Act permits other states that do not meet national ambient air quality standards to adopt California’s motor vehicle emission standards no later than two years before the affected model year. New York, Massachusetts, Vermont, and Maine adopted the California standards effective with the 2001 model year or before; New York, Massachusetts and Vermont have adopted the California ZEV mandate beginning with the 2007 model year. In January 2004, the New Jersey legislature voted to adopt California standards, including the ZEV mandate, beginning with model year 2009. Other states, including Maryland, New Hampshire, Oregon and Washington, are currently considering the adoption of California standards, including the ZEV mandate. There are problems inherent in transferring California standards to other states, including the following: 1) the driving range of many ZEVs is greatly diminished in cold weather, thereby limiting their market appeal; and 2) the northeast states have refused to adopt the California reformulated gasoline regulations, which may impair the ability of vehicles to meet California’s in-use standards.

      Ford has accumulated ZEV credits in California, New York and Massachusetts through past sales of battery electric vehicles, and we have plans to accumulate more credits by selling future PZEV models. In the longer term, however, it is doubtful whether the market will support the number of required ZEVs, even taking into account the recent modifications of the ZEV mandate. Fuel cell technology may in the future enable production of ZEVs with widespread consumer appeal. However, due to the engineering challenges, the high cost of the technology, infrastructure needs, and other issues, it does not appear that mass production of fuel cell vehicles will be commercially feasible for years to come. Compliance with the ZEV mandate may eventually require costly actions that would have a substantial adverse effect on Ford’s sales volume and profits. For example, Ford could be required to curtail the sale of non-ZEVs and/or offer to sell ZEVs and PZEVs well below cost.

      Under the Clean Air Act, the EPA and CARB may require manufacturers to recall and repair non-conforming vehicles (which may be identified by testing or analysis done by the manufacturer, EPA or CARB), or we may voluntarily stop shipment of or recall non-conforming vehicles. The costs of related repairs or inspections associated with such recalls, or a stop shipment order, could be substantial.

      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. In 1998, the EU adopted a new directive on emissions from passenger cars and light commercial trucks. More stringent emissions standards applied to new car certifications beginning January 1, 2000 and to new car registrations beginning January 1, 2001 (“Stage III Standards”). A second level of even more stringent emissions standards apply to new car certifications beginning January 1, 2005 and to new car registrations beginning January 1, 2006 (“Stage IV Standards”). The comparable light commercial truck Stage III Standards and Stage IV Standards come into effect one year later than the passenger car requirements. The directive 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

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80,000 kilometers of vehicle life (extended to 100,000 kilometers in 2005). Failures of in-service compliance tests could lead to vehicle recalls with substantial costs for related inspections or repairs. The Stage IV Standards for diesel engines have proven technologically difficult and have precluded manufacturers from offering some products in time to be eligible for government incentive programs. A related EU directive was adopted, also in 1998, which established standards for cleaner fuels beginning in 2000 and even cleaner fuels in 2005. The EU commenced a program in 2004 to determine the specifics for further changes to vehicle emission standards.

      Other National Requirements. Many countries, in an effort to address their air quality problems, are adopting previous versions of European or United Nations Economic Commission for Europe 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 has adopted the most recent European standards to be implemented in the 2008-2010 timeframe. Korea and Taiwan have adopted very stringent U.S. based standards. Because fleet average requirements do not apply, some vehicle emission control systems may have to be redesigned to meet the requirements in these markets. Japan has unique standards and test procedures and is considering more stringent standards for implementation in 2009. This may require unique emission control systems being designed for the Japanese market.

Stationary Source Emissions Control

      In the United States, the Federal Clean Air Act also requires the EPA to identify “hazardous air pollutants” from various industries and promulgate rules restricting their emission. The EPA has issued proposed or final rules for a variety of industrial categories, several of which would further regulate emissions from our U.S. operations, including engine testing, automobile surface coating and iron casting. These technology-based standards could require certain of our facilities to significantly reduce their air emissions. Additional programs under the Clean Air Act, including Compliance Assurance Monitoring and periodic monitoring could require our facilities to install additional emission monitoring equipment. The cost to us, in the aggregate, to comply with these requirements could be substantial.

Motor Vehicle Safety

      U.S. Requirements. The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates motor vehicles and motor vehicle equipment in the United States 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 motor vehicle safety standards established by the National Highway Traffic Safety Administration (“NHTSA”). Meeting or exceeding many safety standards is costly, 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 also is obligated to recall vehicles if it determines that the vehicles do not comply with a safety standard. Should Ford or NHTSA determine that either a safety defect or a noncompliance exists with respect to certain of Ford’s vehicles, the costs of such recall campaigns could be substantial. There were pending before NHTSA six investigations relating to alleged safety defects or potential compliance issues in Ford vehicles as of February 21, 2005.

      The Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREAD Act”) was signed into law in November 2000. The TREAD Act required NHTSA to establish several new regulations, including reporting requirements for motor vehicle manufacturers on foreign recalls and certain information received by the manufacturer that may assist the agency in the early identification of safety defects. As part of its rulemaking efforts, NHTSA defined certain types of material provided by manufacturers as competitively sensitive and entitled to a presumption of

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confidentiality, including warranty claim information, field reports, and consumer complaint information. Public Citizen, an advocacy organization, has filed a lawsuit challenging NHTSA’s confidentiality determinations, which may be resolved in the 2005 calendar year. If Public Citizen prevails, Ford and other manufacturers may lose the ability to protect warranty and consumer information after it is submitted to NHTSA pursuant to the TREAD Act.

      Foreign Requirements. Canada, the EU, individual member countries within the EU, and other countries in Europe, South America and the Asia Pacific markets also have safety standards applicable to motor vehicles and are likely to adopt additional or more stringent standards in the future. In addition, the European Automobile Manufacturers Association (“EAMA”) (also known in Europe as the “ACEA”), of which Ford is a member, made a voluntary commitment in June 2001 to introduce a range of safety measures to improve pedestrian protection with the first phase starting in 2005 and a second phase starting in 2010. Similar commitments were subsequently made by the Japanese and Korean automobile manufacturers associations. As a result, over 99% of cars and small vans sold in Europe are covered by industry safety commitments. The European Council of Ministers and the European Parliament published a directive in December 2003 and a decision in February 2004, which together lay down detailed technical provisions for enforcement of the industry commitments (i.e., the application dates, the types of tests to be conducted the test procedures to be used and the limit values to be achieved).

Motor Vehicle Fuel Economy

      U.S. Requirements. Under federal law, vehicles must meet minimum corporate average fuel economy (“CAFE”) standards set by 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 three succeeding model years.

      The law established a passenger car CAFE standard of 27.5 miles per gallon for 1985 and later model years, which NHTSA believes it has the authority to amend to a level it determines to be the maximum feasible level. In April 2003, NHTSA issued a final rule increasing the CAFE standard for light trucks to 21.0 miles per gallon for model year 2005; 21.6 miles per gallon for model year 2006; and 22.2 miles per gallon for model year 2007. NHTSA is currently seeking public comment on the possibility of changing the framework of the light truck CAFE standards and/or creating a new vehicle classification scheme, and is working to set light truck standards for the 2008 model year and beyond. It is anticipated that NHTSA will also start a rulemaking process to increase CAFE standards for passenger cars in the near future. There is renewed interest in CAFE in Congress, and there is some potential for new legislation that avoids the regulatory process and establishes new standards by statute. Pressure to increase CAFE standards stems in part from concerns over “greenhouse gas” emissions, which may affect the global climate.

      In 1999, a petition was filed with the EPA requesting that it regulate carbon dioxide emissions (a greenhouse gas) from motor vehicles under the Clean Air Act, which would have the effect of imposing more stringent fuel economy standards. The petitioners filed suit in an effort to compel a formal response from the EPA. In August 2003, the EPA denied the petition on the grounds that 1) the Clean Air Act does not authorize the EPA to regulate greenhouse gas emissions, and 2) only NHTSA is authorized to regulate fuel economy under the CAFE law. A number of states, cities, and environmental groups filed for review of the EPA’s decision in the United States Court of Appeals for the District of Columbia Circuit. A coalition of states and industry trade groups, including the Alliance of Automobile Manufacturers, an industry trade group made up of nine leading automotive manufacturers including BMW, DaimlerChrysler, Ford, General Motors and Toyota (the “Alliance”), intervened in support of the EPA’s decision. The case has been briefed and oral argument is currently scheduled for April 2005.

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      In September 2004, CARB adopted greenhouse gas emissions regulations for 2009 model year and later cars and trucks, effectively imposing more stringent fuel economy standards than those set by NHTSA. These regulations impose standards that are equivalent to a CAFE standard of more than 43 miles per gallon for passenger cars and small trucks, and approximately 27 miles per gallon for light- and medium-duty passenger trucks by model year 2016. The Alliance and individual companies (including Ford) submitted comments opposing the rules and addressing errors in CARB’s underlying economic and technical analyses. In December 2004, the Alliance filed suit, challenging the regulation on several bases, including that it is preempted by the federal CAFE law. Other states are considering similar greenhouse gas legislation (primarily those states that have adopted or are adopting the earlier California emissions regulations).

      In general, a continued increase in demand for larger vehicles, coupled with a decline in demand for small and middle-size vehicles, could jeopardize our long-term ability to comply with CAFE standards. In addition, if significant increases in CAFE standards for upcoming model years are imposed beyond those presently in effect or proposed, or if the EPA or other agencies regulate carbon dioxide emissions from motor vehicles, we might find it necessary to take various costly actions that could have substantial adverse effects on our sales volume and profits. For example, we might have to curtail production of larger, family-size and luxury cars and full-size light trucks, restrict offerings of engines and popular options, and increase market support programs for our most fuel-efficient cars and light trucks.

      European Requirements. The EU is a party to the Kyoto Protocol and has agreed to reduce greenhouse gas emissions by 8% below their 1990 levels during the 2008-2012 period. In December 1997, the European Council of Environment Ministers (the “Environment Council”) reaffirmed its goal to reduce average carbon dioxide emissions from new cars to 120 grams per kilometer by 2010 (at the latest) and invited European motor vehicle manufacturers to negotiate further with the European Commission on a satisfactory voluntary environmental agreement to help achieve this goal. In October 1998, the EU agreed to support an environmental agreement with EAMA (of which Ford is a member) on carbon dioxide emission reductions from new passenger cars (the “Agreement”). The Agreement establishes an emission target of 140 grams of carbon dioxide per kilometer for the average of new cars sold in the EU by the EAMA’s members in 2008. Average carbon dioxide emissions of 140 grams per kilometer for new passenger cars corresponds to a 25% reduction in average carbon dioxide emissions compared to 1995. To date, the industry has made good progress and has met the interim target for 2003 (165 — 170 grams of carbon dioxide per kilometer).

      In 2005, EAMA and the European Commission will review the potential for additional carbon dioxide reductions, with a view to moving further toward the EU’s objective of 120 grams of carbon dioxide per kilometer by 2010.

      In 1995, members of the German Automobile Manufacturers Association (“GAMA”) (including Ford Werke GmbH) made a voluntary pledge to increase by 2005 the average fuel economy of new cars sold in Germany by 25% from 1990 levels, to make regular reports on fuel consumption, and to increase industry research and development efforts toward this end. GAMA has reported that the industry is on track to meet this pledge.

      Other European countries are considering other initiatives for reducing carbon dioxide emissions from motor vehicles, including fiscal measures. For example, the UK introduced vehicle excise duty and company car taxation based on carbon dioxide emissions in 2001. Taken together, such proposals could have substantial adverse effects on our sales volumes and profits in Europe.

      Other National Requirements. Asian countries have also adopted fuel efficiency targets. For example, Japan has fuel efficiency targets for 2010 passenger car and commercial trucks with incentives for early adoption. China has adopted targets for 2005 and 2008 and is expected to continue setting new targets to address energy security issues.

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      Canada has been working with the auto sector to decrease greenhouse gas emissions from automobiles by 2010. With the ratification of the Kyoto Agreement, Canada has been aggressively trying to finalize a voluntary agreement with the auto industry. Depending on the negotiations, costly vehicle or market actions may have to be taken to achieve these targets.

Recycling End-of-Life Vehicles

      U.S. Requirements. Maine has adopted an automotive end-of-life mercury switch collection program. Under Maine’s law, automobile manufacturers pay for the collection and recycling of these switches. Several additional states and the EPA are also looking at manufacturer responsibility for mercury switches. Actions associated with this movement could be costly.

      European Requirements. The European Parliament has published a directive imposing an obligation on motor vehicle manufacturers to take back end-of-life vehicles with zero or negative value registered after July 1, 2002, and to take back all other end-of-life vehicles with zero or negative value as of January 1, 2007, with no cost to the last owner. The directive also imposes requirements on the proportion of the vehicle that may be disposed of in landfills and the proportion that must be reused or recycled beginning in 2006, and bans the use of certain substances in vehicles beginning with vehicles registered after July 2003. Member states may apply these provisions prior to the dates mentioned above.

      Presently, there are numerous uncertainties surrounding the form and implementation of the legislation in different member states, especially regarding manufacturers’ responsibilities and the resultant expenses that may be incurred. As of December 31, 2004, the following member states had adopted legislation to implement the directive: The Netherlands, Germany, Belgium, Austria, Spain, Luxemburg, Italy, France, Portugal, Finland, Greece, Denmark and Sweden (Denmark and Sweden both continuing existing systems). The UK has adopted legislation for new vehicles and has legislation pending to address vehicles already sold, while Ireland is expected to complete legislation addressing new and existing vehicles in 2005. Based on the legislation that has been enacted to date and favorable contracts signed with local operators in charge of the return and treatment of vehicles, we have been able to reduce accruals at December 31, 2004 for compliance costs we expect to incur for our existing vehicle populations in these and other countries. The directive should not result in significant cash expenditures before 2007.

Mobile Air Conditioning

      The European Commission adopted a draft regulation in August 2003 to phase out the use of HFC-134a as a refrigerant in mobile air conditioning units. The regulation would phase out the use of this refrigerant between 2009 and 2013 and provide credits for the early introduction of more leak-resistant air conditioning systems and alternative refrigerants. These requirements may increase the cost of vehicle air conditioning. This proposed regulation has been referred to the European Council and the European Parliament for their consideration.

European Chemicals Policy

      The European Commission adopted a draft regulation in October 2003 for a single system to register, evaluate, and authorize the use of certain chemicals (“REACH”). Final adoption of the regulation is anticipated in the 2006-2007 timeframe, followed by a pre-registration phase of three years. After that initial phase, a prioritization of all registered substances is likely to be conducted (using criteria yet to be determined). The regulation may accelerate the ban or restriction on use of certain chemicals and materials, which could increase the costs of certain products and processes used to manufacture vehicles and parts.

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Pollution Control Costs

      During the period 2005 through 2009, we expect to spend approximately $350 million on our North American and European facilities to comply with air and water pollution and hazardous waste control standards, which are now in effect or are scheduled to come into effect. Of this total, we estimate spending approximately $100 million in 2005 and $60 million in 2006. Specific environmental expenses are difficult to isolate because expenditures may be made for more than one purpose, making precise classification difficult.

EMPLOYMENT DATA

      The number of on-roll employees we employed in consolidated entities (including entities we do not control), by business unit, at December 31, 2004 and 2003 was:

      As shown in the employment data above, from December 31, 2003 to December 31, 2004, the number of people we employ decreased approximately one percent. This decrease primarily reflects capacity reductions and improved manufacturing efficiencies in North America and Europe, offset partially by the addition of newly consolidated European dealerships and our expanding business in South America, Asia Pacific and at Hertz. The employment numbers in the table above exclude approximately 17,700 hourly employees of Ford who are assigned to Visteon Corporation (“Visteon”), our largest supplier, and, pursuant to our collective bargaining agreement with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”), remain Ford employees. Visteon reimburses us for most of the costs associated with these employees. See Item 7. “Management Discussion and Analysis — Outlook” for additional discussion relating to Visteon.

      Substantially all of the hourly employees in our Automotive operations in the United States are represented by unions and covered by collective bargaining agreements. Approximately 99% of these unionized hourly employees in our Automotive segment are represented by the UAW. Approximately 3% of our salaried employees are represented by unions. Most hourly employees and many non-management salaried employees of our subsidiaries outside the United States also are represented by unions.

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      Our average labor cost per hour worked for hourly employees of Ford Motor Company in the United States (including employees assigned to Visteon Corporation), excluding subsidiaries, was as follows for the listed years:

      We have entered into collective bargaining agreements with the UAW and the National Automobile, Aerospace, Transportation and General Workers Union of Canada (“CAW”). Among other things, our agreements with the UAW and CAW provide for guaranteed wage and benefit levels throughout their terms and provide for significant employment security. As a practical matter, these agreements may restrict our ability to eliminate product lines, close plants, and divest businesses. Our agreement with the UAW is scheduled to expire on September 14, 2007, and our agreement with the CAW is scheduled to expire on September 20, 2005. Historically, negotiation of new collective bargaining agreements with the UAW and CAW have typically resulted in increases in wages and benefits, including retirement benefits, and some of these increases typically have been provided to salaried employees as well.

      In 2004, we negotiated new Ford agreements with labor unions in Argentina, Brazil, Britain, France, Germany, Mexico, Southern Africa, Taiwan, Thailand, Venezuela, and Vietnam. We also negotiated new collective bargaining agreements to cover employees at our Jaguar (Britain), Land Rover (Britain) and Volvo (Sweden) affiliates.

      We are or will be negotiating new Ford collective bargaining agreements with labor unions in Argentina, Brazil, Canada, France, Mexico, Spain, Taiwan, Thailand, and Vietnam where current agreements will expire in 2005. We will also be negotiating new collective bargaining agreements to cover employees at our Aston Martin (Britain), Land Rover (Britain) and Volvo (Belgium and Sweden) affiliates in 2005.

      In recent years, we have not had significant work stoppages at our facilities, but they have occurred in some of our suppliers’ facilities. A work stoppage could occur as a result of disputes under our collective bargaining agreements with labor unions or in connection with negotiations of new collective bargaining agreements, which, if protracted, could adversely affect our business and results of operation. Work stoppages at supplier facilities for labor or other reasons could have similar consequences if alternate sources of components are not readily available. Our Canadian operations, which are covered by the CAW agreement expiring in September 2005, include facilities that are the primary source of engines for many of our truck and sport utility models, which are among our most profitable models. Therefore, any protracted work stoppage at our Canadian facilities in connection with the negotiation of a new collective bargaining agreement with the CAW could have a substantial adverse effect on our business.

ENGINEERING, RESEARCH AND DEVELOPMENT

      We conduct 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 also have staffs of scientists who engage in basic research. We maintain extensive engineering, research and design centers for these purposes, including large centers in Dearborn, Michigan; Dunton, Gaydon and Whitley, England; Gothenburg, Sweden; and Aachen and Merkenich, Germany. Most of our engineering research and development relates to our Automotive sector. In general, our engineering activities that do not involve basic research or product development, such as manufacturing engineering, are excluded from our engineering, research and development charges discussed below.

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     During the last three years, we recorded charges to our consolidated income for engineering, research and development we sponsored in the following amounts: $7.4 billion (2004), $7.3 billion (2003), and $7.5 billion (2002). Any customer-sponsored research and development activities that we conduct are not material.

      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. These facilities are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, and transmission plants. Most of our distribution centers are leased (approximately 38% of our total square footage is owned). 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 use by Ford, these spaces are not included in the number of distribution centers/warehouses listed in the table below. All 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 92% of the total square footage of our engineering centers and our supplementary research and development space is owned by us.

      In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers, and engineering centers outside the United States. We own substantially all of the 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 use by Ford, 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 are shown below.

      Included in the number of plants used by the Ford Europe and PAG and Ford Asia Pacific and Africa/ Mazda segments 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. The following are the most significant of these consolidated joint ventures and the number of plants they own:

	•	Ford Otosan — a joint venture in Turkey between Ford (41% partner), the Koc Group of Turkey (41% partner) and public investors (18%) that is our single source supplier of the Ford Transit Connect vehicle and our sole distributor of Ford vehicles in Turkey. In addition, Ford Otosan makes the Ford Transit van and the Cargo truck for the Turkish and export markets, and certain engines and transmissions under license. This joint venture owns and operates two plants in Turkey.
	•	Getrag Ford Transmissions GmbH — a 50/50 joint venture with Getrag Deutsche Venture GmbH & Co. Kg i.G., a German company, to which we transferred our European manual

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		transmission operations in Halewood, England, Cologne, Germany and Bordeaux, France. In 2004, Volvo Car Corporation (“Volvo Cars”) agreed to transfer its manual transmission operations from its Köping, Sweden plant to this joint venture. The Getrag joint venture produces manual transmissions for our operations in Europe (Ford Europe and PAG). Ford currently supplies most of the hourly and salaried labor requirements of the operations transferred to this Getrag joint venture. Ford employees who worked at the manual transmission operations that were transferred at the time of the formation of the joint venture are assigned to the joint venture by Ford. In the event of surplus labor at the joint venture, Ford employees assigned to the joint venture may return to Ford. Employees hired in the future to work in these operations will be employed directly by the joint venture. Getrag Ford Transmissions GmbH reimburses Ford for the full cost of the hourly and salaried labor supplied by Ford. This joint venture operates or will operate three plants.
	•	Getrag All Wheel Drive AB — a joint venture in Sweden between Getrag Dana Holding GmbH (“Getrag/ Dana”) (60% partner) and Volvo Cars (40% partner). In January 2004, Volvo Cars entered into agreements with Getrag/ Dana to transfer Volvo Cars’ plant in Köping, Sweden to this joint venture. The joint venture produces all-wheel drive components and, for a time, chassis components as well. As noted above, the manual transmission operations at the Köping plant will be transferred to Getrag Ford Transmissions GmbH. The hourly and salaried employees at the plant have become employees of the joint venture.
	•	TEKFOR Cologne GmbH — a 50/50 joint venture with Neumayer Holding GmbH, a German company, to which Ford Werke GmbH transferred the operations of the Ford forge in Cologne. The joint venture produces forged components, primarily for transmissions and chassis, for use in Ford vehicles and sale to third parties. Those Ford employees that worked at the Cologne Forge Plant at the time of the formation of the joint venture are assigned to the joint venture by Ford and remain employees of Ford. All new employees hired to work at the forge will be hired as employees of the joint venture. In the event of surplus labor at the joint venture, Ford employees assigned to the joint venture may return to Ford. TEKFOR Cologne GmbH reimburses Ford for full cost of the Ford employees assigned to the joint venture. This joint venture operates one plant.
	•	Pininfarina Sverige, AB — a joint venture between Volvo Cars (40% partner) and Pininfarina, S.p.A. (60% partner). In September 2003, Volvo Cars entered into agreements with Pininfarina to establish this joint venture for the engineering and manufacture of niche vehicles, starting with a new, small convertible. Volvo Cars has outsourced the design and engineering to Pininfarina. The joint venture will produce the car at the Uddevalla Plant in Sweden, which was transferred from Volvo Cars to the joint venture and is the joint venture’s only plant.
	•	Ford Vietnam Limited — a joint venture between Ford (75% partner) and Song Cong Diesel (25% partner). Ford Vietnam assembles and distributes several Ford vehicles in Vietnam, including Escape, Laser, Mondeo, Ranger and Transit. Ford Vietnam is planning to launch Ford Everest and Ford Focus in 2005. This joint venture operates one plant.
	•	Ford India Private Limited (“Ford India”) — a joint venture between Ford (84% partner) and Mahindra & Mahindra Limited (16% partner). Ford India assembles and distributes the Ford Ikon and Endeavour in India, Nepal and Bangladesh. Ford India also imports and distributes the Mondeo. Ikon kits are exported to Mexico, South Africa and China. This joint venture operates one plant.
	•	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

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		as Mazda and Suzuki. 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.

      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 other, non-consolidated joint ventures of which we are a partner. These additional plants are not included in the number of plants shown in the table above. The most significant of these joint ventures are:

	•	AutoAlliance International (“AAI”) — a 50/50 joint venture with Mazda (of which we own 33.4%), which owns and operates as its principal business an automobile vehicle assembly plant in Flat Rock, Michigan. AAI currently produces the Mazda6 vehicle and the new Ford Mustang. Ford supplies all of the hourly and substantially all of the salaried labor requirements to AAI, and AAI reimburses Ford for the full cost of that labor.
	•	AutoAlliance (Thailand) (“AAT”) — a joint venture among Ford (50%), Mazda (45%) and a Thai affiliate of Mazda’s (5%), which owns and operates a manufacturing plant in Rayong, Thailand. AAT produces the Ford Everest, Ford Ranger and Mazda B-Series pickup trucks for the Thai market and for export to over 100 countries worldwide (other than North America), in both built-up and kit form.
	•	Blue Diamond Truck, S de RL de CV — a joint venture between Ford (49% partner) and International Truck and Engine Corporation (51% partner), a subsidiary of Navistar International Corporation (“Navistar”). Blue Diamond Truck develops and manufactures selected medium and light commercial trucks in Mexico and sells the vehicles to Ford and Navistar for their own independent distribution. Blue Diamond Truck manufactures Ford F-650/750 medium-duty commercial trucks that are sold in the United States and Canada, and Navistar medium-duty commercial trucks that are sold in Mexico. Production of a low-cab-forward, light-/medium-duty commercial truck for each of Ford and Navistar will commence in 2005.
	•	Blue Diamond Parts, LLC — a joint venture between Ford (51% partner) and Navistar (49% partner). Blue Diamond Parts manages sourcing, merchandising, and distribution of various replacement parts.
	•	Tenedora Nemak, S.A. de C.V. — a joint venture between Ford (15% partner) and a subsidiary of Mexican conglomerate Alfa S.A. de C.V. (85% partner), which owns and operates, among other facilities, our former Canadian castings operations, and supplies engine blocks and heads to several of our engine plants. Ford supplies a portion of the hourly labor requirements for the Canadian plants, for which it is fully reimbursed by the joint venture.
	•	Changan Ford Automobile Corporation (“Changan Ford”) — a 50/50 joint venture between Ford and the Chongqing Changan Automobile Co, Ltd. Changan Ford produces and distributes in China the Ford Fiesta and Mondeo, and is planning to launch the Ford Focus and Mazda3 vehicles in 2005. Changan Ford has filed an application with the Chinese government for permission to set up a new vehicle manufacturing plant in the Chinese city of Nanjing.
	•	Jiangling Motors Corporation — a publicly traded company in China owned by Ford (30% shareholder), the Jiangling Motors Company Group (41% shareholder) and public investors (29%) that assembles the Ford Transit Van and other non-Ford vehicles for distribution in China.
	•	Ford Malaysia Sdn. Bhd. — a joint venture between Ford (49% partner) and Tractors Malaysia, a publicly-traded subsidiary of Sime Darby (51% partner). Ford Malaysia distributes

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		Ford vehicles assembled by its wholly-owned subsidiary AMI, an assembly company, including Econovan, Escape, Everest, Laser and Ranger.

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

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

OVERVIEW

      Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against us and our subsidiaries, including, but not limited to, those arising out of the following: alleged defects in our products; governmental regulations covering safety, emissions, and fuel economy; financial services; employment-related matters; dealer, supplier, and other contractual relationships; intellectual property rights; product warranties; environmental matters; and shareholder matters. Some of the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive or antitrust or other multiplied damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions or other relief that, if granted, would require very large expenditures. We regularly evaluate the expected outcome of product liability litigation and other litigation matters. We have accrued expenses for probable losses on product liability matters, in the aggregate, based on an analysis of historical litigation payouts and trends. Expenses also have been accrued for other litigation where losses are deemed probable and reasonably estimable. These accruals are reflected in our financial statements.

      Following is a discussion of our significant pending legal proceedings:

PRODUCT LIABILITY MATTERS

      Asbestos Matters. Asbestos was used in brakes, clutches and other automotive components dating from the early 1900s. Along with other vehicle manufacturers, we have been the target of asbestos litigation and, as a result, we are a defendant in various actions for injuries claimed to have resulted from alleged contact with certain 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 (i) component parts found in older vehicles (ii) insulation or other asbestos products in our facilities or (iii) asbestos aboard our former maritime fleet. The majority of these cases have been filed in the state courts.

      Most of the asbestos litigation we face involves mechanics or other individuals who have worked on the brakes of our vehicles over the years. Also, in most asbestos litigation we are not the sole defendant. We believe we are being more aggressively targeted in asbestos suits because many previously targeted companies have filed for bankruptcy. We are prepared to defend these asbestos-related cases and, with respect to the cases alleging exposure from our brakes, believe that the scientific evidence confirms our long-standing position that mechanics and others are not at an 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. The majority of our asbestos cases do not specify a dollar amount for damages, and in many of the other cases the dollar amount specified is the jurisdictional minimum. The vast majority of these cases involve multiple defendants, with the number in some cases exceeding one hundred. Many of these

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cases involve multiple plaintiffs, and we are often unable to tell from the pleadings which of the plaintiffs are making claims against us (as opposed to other defendants). Our annual payout and related defense costs in asbestos cases had been increasing between 1999 and 2003. In 2004, these costs were about the same as in 2003; however, they may become substantial in the future.

      The United States Congress continues to consider proposals to reform asbestos litigation. The lead proposal would create a trust fund from which eligible asbestos claimants would be compensated and would preclude, during the life of the trust, litigation in the United States based on exposure to asbestos. The trust fund would be funded by asbestos defendants (including us) and the insurance industry. These funds would be used to pay eligible claimants (i.e., those who satisfy specific medical criteria and can adequately demonstrate occupational exposure to asbestos) according to a specified schedule. If legislation is enacted creating such a trust fund, we would likely be required to make substantial contributions to the fund over a specified period of time, resulting in our incurring a charge in the amount of the present value of such anticipated contributions in the period in which the legislation becomes effective. We cannot predict whether or in what form the legislation will be enacted or the costs associated with such enactment.

ENVIRONMENTAL MATTERS

      General. We have received notices under various federal and state environmental laws that we (along with others) 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 substantial. The contingent losses that we expect to incur in connection with many of these sites have been accrued and those losses are reflected in our financial statements in accordance with generally accepted accounting principles. However, for many sites, the remediation costs and other damages for which we ultimately may be responsible are not reasonably estimable because of uncertainties with respect to factors such as our connection to the site or to materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation). As a result, we are unable to determine or reasonably estimate the amount of costs or other damages for which we are potentially responsible in connection with these sites, although that total could be substantial.

      St. Louis Assembly Plant Enforcement Action. The Department of Justice has advised us that the United States Environmental Protection Agency (“EPA”) has referred a matter regarding refrigerants used in several types of process equipment at our St. Louis Assembly Plant to it for civil enforcement. The referral is based on their belief that the plant did not comply with all of the Clean Air Act’s recordkeeping, testing, and repair requirements related to process equipment with regulated refrigerants. It is likely that the Department of Justice will seek monetary sanctions of $100,000 or more for these alleged violations.

      Chicago Assembly Plant Notice of Violation Regarding Waste Handling. On August 23, 2004, the EPA, Region Five, issued a letter notifying Ford of its intent to file an administrative complaint for civil penalties based on an initial determination that Ford’s Chicago Assembly Plant violated certain requirements of the Resource Conservation and Recovery Act. The EPA’s allegations arise out of an EPA inspection of the Chicago Assembly Plant conducted in November 2002. The violations alleged by EPA include: improper hazardous waste handling and storage, improper waste characterizations and manifesting, and failure to conduct and record certain tank and storage area inspections. Ford and EPA met to discuss this matter in the fourth quarter of 2004. It is reasonably possible that the EPA could seek monetary sanctions of $100,000 or more for these alleged violations.

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CLASS ACTIONS

      The following are actions filed against us on behalf of individual plaintiffs and all others similarly situated (i.e., purported class actions). In light of the fact that very few of the purported class actions filed against us in the past have ever been certified by the courts as class actions, the actions listed below are limited to those that (i) 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) if resolved unfavorably to the Company, would likely involve a significant cost.

      Firestone Class Actions. A state court in Illinois has certified a statewide class of purchasers and lessees of 1991-2001 Ford Explorers equipped with Firestone ATX or Wilderness tires who have not experienced any problems with either the tires or the vehicles (Rowan v. Ford Motor Company). The complaint alleges that Explorers are unstable and that the Firestone tires are defective. Plaintiffs claim that the value of the vehicles was diminished because of the alleged defects and seek unspecified actual and compensatory damages and other relief. Trial is currently scheduled for July 11, 2005, but we expect the trial will be rescheduled for late 2005 or early 2006.

      In February 2005, a state court in California certified a statewide class of purchasers and lessees of 1990-2000 Ford Explorers (Gray v. Ford Motor Company and four coordinated cases). The complaint alleges that Explorers are unstable and that Ford concealed information about them. Plaintiffs seek relief similar to that sought in Rowan. We will seek appellate review of the class certification order.

      There are also 19 purported statewide class actions pending in several states, raising allegations similar to those raised in Rowan, and seeking similar relief. Bridgestone-Firestone, Inc. (“Firestone”) is a co-defendant in most of these cases, including Rowan. Firestone has agreed to settle all claims against it in these cases (including Rowan). Under the terms of the settlement agreement, Firestone would implement manufacturing improvements and fund a consumer awareness program relating to tire use and maintenance. Firestone’s settlement would also require plaintiffs to dismiss all class action claims against Ford that are based on alleged defects in the tires. A Texas trial court has approved the Firestone settlement, but that ruling is currently on appeal to the Texas Court of Appeals. If the Firestone settlement is approved on appeal, the only remaining claims against Ford in Rowan and the purported class actions would be allegations based on the Explorer’s alleged rollover propensity.

      Paint Class Actions. A state court in Madison County, Illinois certified a nationwide class of owners of 1989-96 model year vehicles that have experienced paint peeling. Plaintiffs contend that their paint is defective in two respects. First, they allege that, because Ford did not use spray primer between the high-build electro coat (“HBEC”) and the color coat in some models, the color coat lost adhesion to the HBEC after extended exposure to ultraviolet radiation from sunlight. Second, they allege that the clearcoat on some models deteriorated prematurely. Plaintiffs seek unspecified compensatory damages (in an amount to cover the cost of repainting their vehicles and to compensate for alleged diminution in value), punitive damages, attorneys’ fees and interest. Trial is currently scheduled for June 2006.

      Crown Victoria Police Interceptor Class Actions. State courts in Illinois, Florida and Louisiana have certified statewide classes of state and local governments that purchased or leased Crown Victoria Police Interceptors. The complaints allege that the vehicles are defective in that fires can occur when the vehicles are struck in the rear at high speed, and seek modifications to the fuel systems and other relief, including punitive damages. Trial in the Illinois case during 2004 (St. Clair County v Ford Motor Company) resulted in a defense verdict on all counts submitted to the jury; three counts remain pending for decision by the judge.

      There are also 16 purported statewide class actions pending in several states which claim to represent state and local governments that purchased or leased Crown Victoria Police Interceptors,

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as well as seven purported class actions relating to non-police Crown Victoria vehicles. These suits raise allegations similar to those raised in St. Clair County, and seek similar relief.

     Hydroboost Truck Brake Class Action. A state court in Oklahoma has certified a nationwide class of all purchasers of 1999-2002 F-250, F-350, F-450, and F-550 Ford Super Duty Trucks and 2002 Excursions with hydroboost hydraulic braking systems. The Oklahoma Court of Appeals has affirmed the order; we will seek review by the Oklahoma Supreme Court. The complaint alleges that these trucks are unsafe because they suffer diminished power assist to the steering when the driver is simultaneously braking and steering. The complaint alleges breach of warranty and fraud, and seeks the cost of retrofitting the trucks to eliminate the alleged danger, compensation for diminished resale value, and other amounts. NHTSA investigated a similar issue and closed the investigation, finding that “diminished steering assist while braking is present” in these trucks, but that the “associated injury and property damage incidents are so rare that they do not present a risk to vehicle safety.”

OTHER MATTERS

      SEC Pension and Post-Employment Benefit Accounting Inquiry. On October 14, 2004, the Division of Enforcement of the Securities and Exchange Commission (“SEC”) notified Ford that it was conducting an inquiry into the methodology used to account for pensions and other post-employment benefits. We are one of several companies to receive a request for information as part of this inquiry. We are cooperating with the SEC in providing the information requested.

      SEC Ford Money Market Account Inquiry. In January 2004, the SEC requested information from Ford Credit relating to the offering of debt securities under Ford Credit’s Ford Money Market Account (“FMMA”) program. Under the FMMA program, Ford Credit offers floating rate variable denomination demand debt securities to individual investors. Following the submission of information, the SEC Staff and Ford Credit have been in discussions about resolving concerns the Staff identified regarding the use of certain marketing and solicitation materials. In March 2005, Ford Credit made a settlement offer, with Ford Credit neither admitting nor denying the Staff’s allegations, which included the issuance of a Cease and Desist Order requiring that Ford Credit comply with Section 5 of the Securities Act of 1933 in connection with all marketing and solicitation materials. The terms of the tentative settlement also require Ford Credit to undertake to discontinue or change certain aspects of its marketing practices relating to the FMMA program and to pay the SEC approximately $760,000 in disgorgement (based on cost savings relating to those practices). The SEC Staff has indicated that it will recommend this settlement offer to the Commission. The tentative settlement is subject to approval by the full Commission of the SEC.

      Not required.

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      Our executive officers and their positions and ages at March 1, 2005 unless otherwise noted, are shown in the table below: