Ford Motor Company (F) Q1 2013 Earnings Call Transcript

George Sharp – Executive Director, IR Alan Mulally – President and CEO Bob Shanks – EVP and CFO Mike Seneski – Credit CFO Stephen Odell – President, Europe, Middle East and Africa Sean Ryan – Restraints Supervisor

John Murphy – Bank of America Merrill Lynch Brian Johnson – Barclays Matt Silver – Guggenheim Rod Lache – Deutsche Bank Peter Nesvold – Jefferies Adam Jonas – Morgan Stanley Ryan Brigman – JP Morgan Dee-Ann Durbin – Associated Press Unidentified Company Representative Craig Trudell – Bloomberg News Alisa Priddle – Detroit Free Press Mike Ramsey – Wall Street Journal Chris Ceraso – Credit Suisse Itay Michaeli – Citigroup Joe Speth – RBC Capital Markets

Good day, ladies and gentlemen, and welcome to the Ford First Quarter Earnings Conference Call. My name is Janita and I will be your operator for today. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I will now like to turn the conference over to Mr. George Sharp, Executive Director, Investor Relations. Please proceed, sir.

Thank you, Janita, and good morning, ladies and gentlemen, welcome to all of you who are joining us today either by phone or by webcast. On behalf of the entire Ford management team I’d like to thank you for taking the time to be with us this morning so we can provide you with additional details of our first quarter 2013 financial results. Presenting today are Alan Mulally, President and CEO of Ford Motor Company; and Bob Shanks, Chief Financial Officer. Also participating are Mark Fields, Chief Operating Officer; Stephen Odell, President, Europe, Middle East and Africa; Stuart Rowley, Corporate Controller; Neil Schloss, Corporate Treasurer; Paul Andonian, Director of Accounting; and Mike Seneski, Ford Credit CFO. Now before we begin I’d like to cover a few items. Now copies of this morning’s press release and the presentation slides that we will be using have been posted on Ford’s investor and media website for your reference. The financial results discussed today are presented on a preliminary basis. Final data will be included in our Form 10-Q that will be filed early next month. The financial results presented are on a GAAP basis and in some cases on a non-GAAP basis. The non-GAAP financial measures discussed on this call are reconciled to the U.S. GAAP equivalent as part of the Appendix of the slide deck. Finally today’s presentation includes some forward-looking statements about our expectations for Ford’s future performance. Of course, actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are summarized at the end of this presentation. These risk factors and other key information are detailed in our various SEC filings. With that I’d now like to turn the presentation over to Ford’s President and CEO, Alan Mulally.

Thank you, George, and good morning. We are pleased to review our first quarter performance and the progress we continue to make in delivering of our Win Ford plan. Let’s turn to the first slide. Our Win Ford plan depicted here remains – are we picking up any noise?

I don’t know where it’s coming from.

Sorry. We’re picking up some interference here. On Slide 1, our ONE Ford plan depicted here remains the foundation for everything we do. Across the Ford Enterprise we continue to aggressively restructure the business to operate profitability at current demand and changing model mix, accelerate development of new products our customers want and value; finance our plans to improve our balance sheet and work together effectively as one team leveraging our global assets. A full family of great products, small, medium and large, cars, utilities and trucks that our customers want and value is central to our ONE Ford plan. This year more than 85% of our volume will be on nine global core platforms with examples of nameplates for each platform shown on Slide 2. The benefits from this are more products, faster product cadence and better profitability. Optimizing platform count lets us increased volume per platform, improve our engineering efficiencies and gain economies of scale for us and our suppliers. Our first quarter results demonstrate the progress we are making in executing all elements of our plan. Now on Slide 3 we’d like to share with you a summary of our first quarter results. In the first quarter the company earning an operating profit of $2.1 billion, making it the 15th consecutive profitable quarter. Automotive operating related cash flow was positive as well and we ended the quarter with strong liquidity. The top line grew with year-over-year increase of 10% in both wholesale volume and total company revenue, including market share gains in both North America and Asia Pacific and Africa. Among our business units North America achieved record quarterly performance for pre-tax profit since at least 2000 and Ford Credit’s results were solid once again. Asia Pacific and Africa earned a small profit while Europe and South America incurred losses as anticipated. And in Europe we remain on track to meet the objectives that we established to transform our European business leading to profitability by mid-decade. Finally, today we are reconfirming our full year guidance. Before turning to the financial details let’s recap several other significant noteworthy achievements from the first quarter. As shown on Slide 4 we have launched a number of products around the globe. At the North American International Auto Show we revealed the Ford Atlas and the Lincoln MKC concepts, both of which were very well received. Recently the Ford Focus was named the world’s best-selling passenger car in 2012, with the Ford S-series pickup coming in third and the Ford Fiesta ranking as the best-selling sub-compact. In China our joint venture engine plan in Nanjing produced our 1 millionth made in China engine. In Asia Pacific and Africa our record first quarter retail results were 38% higher than the first quarter of 2012, largely driven by stronger industry and higher market share in China, but supported by retail sales growth in nearly all other Asia Pacific and Africa markets. IN the U.S. we continue to add jobs, announcing an investment of $200 million and the addition of 450 jobs starting in 2014 as part of our plan to move EcoBoost engine production for North America to Cleveland from Valencia, Spain, consistent with our European transformation plan. And on the financial front we announced in January that we doubled the dividend. Now Bob Shanks will take us through the details of our financial performance in the quarter. Bob?

Thanks, gentlemen, and good morning, everyone. I’ll start on Slide 5 with a summary of our business results for the first quarter in a comparison with the year ago period. First quarter wholesale volume was 1.5 million units, up 139,000 units from a year ago and revenue at $35.8 million was up $3.4 billion. As Alan mentioned, both of these topline metrics were up about 10% from the year ago period. Pre-tax profit of $2.1 billion which excludes special items was $147 million lower than a year ago while after tax earnings per share at $0.41 were $0.02 higher. Net income attributable to Ford including unfavorable pre-tax special items of $23 million was $1.6 billion, $215 million better than a year ago. Earnings were $0.40 a share, up $0.05. You can find additional detail on the special items in Appendix 3. Automotive operating related cash flow was $700 million, marking the twelfth consecutive quarter of positive performance. And automotive gross cash was $24.2 billion, exceeding debt by $8.2 billion. Our first quarter operating effective tax rate which isn’t shown was 26%. Consistent with prior guidance we expect our full year operating effective tax rate to be similar to 201 which was 32%. As shown on Slide 6, both of our sectors, Automotive and Financial Services, contributed to total company first quarter pre-tax profit of $2.1 billion. This was $147 million lower than a year ago as shown in the memo, more than explained by the Automotive sector. Compared with fourth quarter of 2012 total company pre-tax profit improved $465 million with both sectors contributing to the better results. The key market factors and financial metrics for our total Automotive business are shown on Slide 7. First quarter wholesale volume and revenue were both approximately 10% higher than a year ago, driven by North America and Asia-Pacific, Africa. The higher volume reflects the impact of higher industry volumes and improved market share as well as favorable changes in dealer stocks. The growth in revenue was mainly driven by the higher volume and net pricing gains, offset partially by unfavorable exchange. Automotive pre-tax profit was $1.6 billion and operating margin was 5.2%, both lower than a year ago due to Europe and South America. The $200 million decrease in total Automotive first quarter pre-tax profit compared with 2012 is explained by causal factor on Slide 8. The decline is more than explained by higher cost and unfavorable exchange. The cost increase reflects mainly investments in higher volume, growth and new products for this year and the future as well as restructuring in Europe and higher pension and OPEB expense. The unfavorable exchange is primarily South America, mainly the Venezuelan bolívar. And partly offsetting these effects are favorable market factors, higher volume and net pricing with each region contributing with the exception of Europe. As shown in the memo, pre-tax profit was $300 million higher than the fourth quarter, more than explained by lower cost in all regions except Europe. Unfavorable exchange, mainly in South America and Europe was a partial offset. You can find more details on the quarter-to-quarter change in Appendix 8. Our first quarter pre-tax results for each of our automotive operations as well as other automotive are shown on Slide 9. North America more than explains the automotive sector profit of $1.6 billion, while South America and Europe incurred losses. Asia Pacific Africa earned a small profit. Other automotive reflects net interest expense offset partially by a favorable fair market value adjustment of our investment in Mazda. For the full year we expect net interest expense to be in line with the first quarter run rate or $750 million to $800. Now we’ll look at each of the regions within the Automotive sector on Slide 10, starting with North America. As you can see in the first two graphs on the left, North America experienced very strong growth in the first quarter with wholesale volume up 17% from a year ago and revenue improving 20%. The volume improvement mainly reflects higher U.S. industry sales, increasing from a SAR of 14.5 million to 15.6 million units, favorable changes in dealers stocks and higher U.S. market share. The revenue change, primarily reflects the higher volume and net pricing gains. North America pre-tax profit was $2.4 billion and as mentioned earlier was a record for any quarter and higher than a year ago due to favorable market factors. Operating margin was 11%, the fourth time over the past 5 quarter has the margin exceeded 10%. This was lower, however, than a year ago, due mainly to our investments for new products and growth. On Slide 11 we show in more detail the causal factors that drove the $300 million improvement in North America’s first quarter pre-tax profit. As you can see the improvement was driven by higher volume and net pricing, offset partially by higher cost, mainly for new products and growth as well as higher pension and OPEB expense. As shown in the memo, pre-tax profit increased by $500,000,000 compared with fourth quarter 2012, explained primarily by seasonal reduction in cost. The company’s total U.S. market share and retail share of the retail industry increased in the first quarter compared with the year ago period and the prior quarter as shown on Slide 12. Starting on the left our total market share was 15.9%, up 0.70 of a percentage point from the same period last year, more than explained by strong sales of the all new Fusion and Escape. This share was up 0.60 of a point from fourth quarter 2012, more than explained by Fusion. As shown on the right, our retail market share of the retail industry was 14%, an improvement of 0.20 of a percentage point from the same period last year as our all new Fusion and Escape did very well in their respective segments. We also benefited from favorable market segmentation of full size pickups. The retail share was up 0.40 of a percentage point from fourth quarter 2012, more than explained by Fusion. Now turning to our full year guidance for North America, it remains unchanged. We expect higher pre-tax profit compared with 2012 and an operating margin of about 10%. Now let’s turn to Slide 13 and take a look at South America. First quarter wholesale volume were both down 4% compared with a year ago. Although the SAAR improved from 5.4 to 5.6 million units, Ford South America volume declined due to unfavorable changes in dealer stocks and lower market share. The market share decline from 9.4% to 9.1% was more than explained by lower availability of Fiesta. South America’s lower revenue reflects unfavorable exchange, net of higher pricing. Pre-tax results were a loss of $218 million and the operating margin was a negative 9.4%. The year-over-year declines in both metrics were more than explained by unfavorable exchange. On Slide 14 we show more detail behind the $272 million decline in South America’s first quarter pre-tax results. As mentioned, unfavorable exchange drove the decline mostly due to Venezuela including the substantial impact of the recent evaluation of the Bolivar. Weakness in the Argentinean Peso also had an unfavorable effect. Net pricing was higher and mix was favorable but these factors were offset by higher costs. As shown in the memo, pre-tax results were $363 million lower than fourth quarter of 2012, explained primarily by unfavorable exchange. Our full year guidance for South America is unchanged. We continue to expect results to be about break even. The external environment however is uncertain particularly in Venezuela and Argentina. So there is a risk this could adversely affect our ability to deliver full year breakeven results for the region. We’ll keep you apprised of our status as the year progresses. Let’s turn now to Europe beginning on Slide 15. Starting on the left, first quarter wholesale volume declined 8% and revenue was down 7%. The volume decline reflects lower market share and industry volume as the SAAR declined from 14.2 million units a year ago to 13.3 million units this year. Favorable changes in dealer stocks were a partial offset. The share decline from 8.5% to 7.7% reflecting mainly lack of availability of CD vehicles as well as our focus to improve retail market share and reduce daily rental and short cycle sales. And to that end, our retail share for the five major Western European markets, estimated at 8.4%, was 0.20 of a percentage point higher than a year ago while our shares of daily rental and short cycle sales were lower as intended. The decline in Europe’s revenue mainly reflects the lower volume. The pre-tax loss for Europe was $462 million and the operating margin was a negative 6.9%. Market factors, costs, including restructuring effects and exchange, all contributed to the declines from a year ago. Slide 16 shows more detail by the causal factors that drove the $313 million decline in Europe’s first quarter pre-tax results compared with a year ago. Most factors were unfavorable. The largest single impact was higher structural costs. This mainly reflects restructuring related costs, principally accelerated depreciation for the facilities we plan to close and higher pension expense due to lower discount rates. The memo on the right side of the graph shows the restructuring related costs included in the operating results. A reminder: separation related costs which were minimal this quarter will be captured in special items. As shown in the memo below the chart, results were $270 million better than fourth quarter 2012, reflecting primarily favorable market factors including higher net pricing. Unfavorable exchange was a partial offset. Slide 17 shows our progress in delivering our European transformation plan focused on product, brand and cost. Our unprecedented product acceleration is well under way. To date we’ve introduce five new passenger vehicles including B-Max, Fiesta, Fiesta ST, Kuga and in an example of expanding our global portfolio to new markets, the Explorer in Russia. The roll out of our completely re-designed and expanded commercial vehicle lineup is also underway with the introduction of Transit Custom and Tourneo Custom. These new vehicles are off to a strong sales start and beginning to help improve Ford’s brand image. While we expect overall market share in Europe to remain flat in 2013 compared with last year. We are seeing growth, as mentioned earlier, in our retail market share which is critical to margins, residuals and brand health. In addition we’re making good progress is quality and customer satisfaction and we remain on track to achieve our targets for the year. We’re also making progress in cost including our plan to restructure our manufacturing base. In that regard, discussions are progressing with the unions at our South Hampton assembly plant and Dagenham Stamping and Tiling operations as we move to close those plants by mid-year. Discussion are progressing at Genk as well where hourly employees have ratified a package of proposed separation benefits and our salaried employees have just reached agreement on a tentative benefits proposal subject to ratification. As the Genk information and consultation process moves forward, we have resumed normal vehicle production levels at the plant. And finally, we did complete the planned reductions to our salaried and agency workforce in Europe that were initiated last year. So in summary, we are on track in delivering our European transformation plan. Now in terms of our full year guidance for Europe, it also remains unchanged. We continue to expect the loss of about $2 billion this year. The outlook for the business environment in Europe however continue to be uncertain. While we still believe it’s possible that economic and industry conditions will begin to stabilize later this year, recent economic indicators are mixed. But despite this challenging environment, we are progressing towards our goal of a profitable, growing Ford Europe by mid-decade. Let’s now review Asia-Pacific, Africa on Slide 18. As shown on the left, first quarter wholesale volume improved 30% compared with a year ago and net revenue, which excludes our China JVs, improved 13%. Our growth and volume reflects mainly higher market share as well as stronger industry sales which increased from a SAAR of 32.5 million to 34.5 million units. First quarter market share in the region was 3%, a 30% improvement from a year ago and a first quarter record. And in China, which isn’t shown, our market share improved more than a full percentage point to a first quarter record of 3.6%. Asia-Pacific, Africa’s higher revenue reflects higher component sales to our China joint ventures and favorable mix. Asia-Pacific, Africa pre-tax profit was $6 million and the operating margin was 0.20 of a percentage point. Both improved from the year ago period. This reflects mainly favorable market factors, higher royalties and improved subsidiary profits. The $101 million improvement from a year ago in Asia-Pacific, Africa’s first quarter pre-tax results is explained by causal factor on Slide 19. As we’ve seen in past quarters, topline related factors, volume, mix and net pricing were favorable offset largely by higher costs as we continue to invest for further growth in the future. This quarter we also benefited from higher royalties in subsidiary profits along with higher sales of parts and services all included in other. As shown in the memo, Asia-Pacific, Africa pre-tax results were $33 million lower than fourth quarter of 2012, more than explained by unfavorable volume including the impact of the Chinese New Year. Our full year guidance for Asia-Pacific, Africa remains the same. We continue to expect results to be about break even. While we expect to deliver strong growth in volume, share and revenue for the year, costs will continue to largely offset these positive effects as we invest in an expanded product line, seven new plants in China and India and people to implement our growth plan. Turning now to Ford Credit, we turned $507 million in the quarter. Slide 20 shows the $55 million increase in first quarter pre-tax profit compared with a year ago by causal factor. The change is primarily explained by higher receivables and favorable residual performance, offset partially by lower credit loss reserve reductions. And as show in the memo, Ford Credit’s pre-tax profit increased by $93 million compared with fourth quarter 2012. For the full year, Ford Credit continues to expect pre-tax profits to be about equal to 2012. Year-end managed receivables of $95 to $105 billion and distributions to its parent of about $200 million. Next on Slide 20 we’ll review our Automotive gross cash and operating related cash flow. Automotive gross cash at the end of the quarter was $24.2 billion, $100 million lower than year end 2012. Automotive related operating related cash flow was $700 million including favorable working capital, changes of $400 million. Our cash flow before financing related changes and dividends was $1.1 billion. Net proceeds were $1 billion reflecting our $2 billion automotive debt issuance where we took advantage of favorable market conditions to issue low cost long term debt. This issuance was offset partially by the redemption of about $600 million of 7.5% callable debt as well as other debt repayments. During the quarter we contributed $1.8 billion to our worldwide funded pension plans which included $1.2 billion of discretionary payments to our U.S. funded plans in line with our previously disclosed long term pension de-risking strategy. And finally, dividend spend in the quarter totaled about $400 million. Now we’ll summarize our Automotive sector cash and debt position at the end of the first quarter which is captured on Slide 22. Automotive debt at the end of the quarter was $16 billion, $1.7 billion higher than year end 2012. This increase is driven primarily by our $2 billion debt issuance and the consolidation of $0.5 billion of debt from our Romania operations offset partially by the redemption of debt I referenced earlier. Proceeds from the debt issuance that were not used for reduction of higher cost debt are being used for pension contributions which will reduce our pension expense by a greater amount than the interest incurred on the debt. Net cash at the end of the quarter stood at $8.2 billion which was $1.8 billion lower than year end 2012. And finally, Automotive liquidity at the end of the quarter was $34.5 billion which was the same as at year end. With that, Alan will now take us through our view of the 2013 global business environment as well as our key playing assumptions and metrics for the year.

Very good. Thank you, Bob. Summarized on Slide 23 is our view of the business environment going forward. Overall our outlook has not changed substantially. We project 2013 global GDP growth to be in the 2% to 3% range. Global industry sales are predicted to be in the 80 million to 85 million unit range. U.S. economic growth is expected to be in the 2% to 2.5% range with industry sales supported by continuing improvement in the housing sector and replacement demand as a result of the older age of the vehicles on the road. In Brazil, fiscal and monetary policies support economic recovery. In Argentina and Venezuela there are escalated risk as both economies are in weak conditions with unclear economic policy direction. In Europe we expect weak conditions to continue especially in countries undergoing fiscal austerity programs. As noted earlier, it is possible that economic and industry conditions will begin to stabilize later this year. Recent policy decisions are positive steps but not yet enough to fully restore business and consumer confidence. In Asia-Pacific and Africa, economic indicators point towards a modest recovery in China this year. Growth in India is below its full potential, partially due to high inflation and interest rates. Overall, despite challenges, we expect global economic growth to continue in 2013. Our guidance for 2013 detailed here in Slide 24 is unchanged from January. We expect full year industry volume to range from 15 million to 16 million units in the United States, Europe to be in the 13 million to 13.5 million, consistent with guidance we provided verbally at the January earnings call. In China to range from 19.5 million to 21.5 million units. We project full year market share to increase compared with 2012 in the United States and China and to be about equal to last year in Europe. We are working to improve quality in all regions. In terms of our financial performance, we expect total company pre-tax profit to be about equal to 2012, Automotive operating margin to be about equal to or lower than 2012 and Automotive operating related cash flow to be higher than 2012 including capital spending of about $7 billion to support aggressive product refresh rates, expansion of our portfolio in the absolute sense and across the region and capacity actions. Overall we expect 2013 to be another strong year for the Ford Motor Company as we continue to work towards our mid-decade guidance. In closing, our One Ford plan is built on a compelling vision, comprehensive strategy and relentless implementation. It includes serving customers in all markets with a full family of vehicles, small, medium and large, cars, utilities and trucks. They will each deliver the highest quality, fuel efficiency, safety, smart design and value while delivering profitable growth for all. Our One Ford plan continues to deliver and we are absolutely focused on building great products, creating a stronger business and contributing to a better world. We delivered strong results in the first quarter and we continue to work our plan for the full year 2013 with continued strength in North America, delivery of global products into South America for product led growth in the remainder of the year even as we work to adjust to an uncertain economic environment in the region. Continued execution of our transformation plan for Europe which is proceeding as plan as we work to return to profitability by mid-decade. Strong investment for long term success in Asia-Pacific and Africa which is already being in improved revenue and market share. And consistent results from our valued Ford Credit operations which deliver world class customer service and solid bottom line results. This concludes our report of our first quarter results. Now we would be delighted to take your questions. George?

Thanks, Alan. Now we’ll open the lines for about a 45 minute Q&A session. We’ll begin with questions from the investment community then take questions from the media. Now in order to allow as many questions as possible within this timeframe, please keep your questions brief. Janita, can we please have the first question?

Thank you. (Operator Instructions) Your first question comes from the line of John Murphy of Bank of America Merrill Lynch. Please proceed. John Murphy – Bank of America Merrill Lynch: Good morning, guys, and thanks for taking the question.

Good morning. John Murphy – Bank of America Merrill Lynch: Good morning. First question on the pension contributions. Do you think there is the opportunity to potentially raise more debt and use that capital to contribute to the pension plan? Because it seems like you’re getting a pretty good ARP there. Is that a strategy you could use for the rest of the contributions?

Well, John, thank you for the question. Well it’s a strategy that we’ve implemented and are executing. I think we’re comfortable with the amount that we’ve taken from the marketplace and don’t have any plans to do anything further in that regard. John Murphy – Bank of America Merrill Lynch: Okay. Second question on Ford Motor Credit. Pretty good start to the year in the first quarter. Just curious if there’s anything that you’re seeing as far as credit trends or anything else as far as originations that would lead you to believe that should deteriorate through the course of the year. Because your guidance seems to indicate the second, third and fourth quarter would be a lot lower than the first quarter. Just trying to understand what the thinking is there.

Hey, John. It’s Mike Seneski. No, credit trends are continuing very well. The reason we’re guiding more towards equal to last year is the residual performance, favorable residual performance we saw in the first quarter. We don’t expect to continue and actually could in fact reverse throughout the year. But other than that we think volume and credit losses should offset each other and a slight increase in operating cost. So that’s why we see about equal. John Murphy – Bank of America Merrill Lynch: Okay. And then just lastly, on raw materials. It seems like it was headwind in most regions in the first quarter. And given the decline we saw last year and really sort of the maybe more aggressive declines in raw mats we’ve seen as of late I was just curious when that could possible turn and become a bit of a tailwind. Because it seems like it’s oddly a headwind and at some point should be a tailwind.

Yeah actually, John, it wasn’t much of a factor at all in the quarter. I think we were only very slightly negative, maybe around $50 million for the total company including hedging effects. I think in terms of business units the one that was affected the most was in South America because of the inflation affects and there’s an exchange piece that gets in there as well since a lot of the currencies are priced in dollars. But overall not much of a factor. You know spot rates indicate some downward pressure on commodities but our call for the full year is it’s going to be relatively benign at this point. John Murphy – Bank of America Merrill Lynch: Okay. And truly the last question. Just on the Fusion and Escape the launch the last year was a little bit bumpy towards the end of the year. It seems to be on track right now. Did you get the full benefit of those products really turning around and really ramping up very significantly in the first quarter? Or is that benefit really going to be more of a second and third quarter benefit in the margins in North America?

Well we had, we’ve certainly had a lot of benefits because Fusion was up 26% in the quarter year-over-year and Escape was up 25%. And the other thing that’s very exciting about that along with the other products in the super-segment is that was one of the bigger parts of our share increase in the quarter and that a lot of that took place on the coast and in the southeast, so it’s just exactly what we wanted those products to deliver. I think as the quarter progressed we got better availability. Still very popular products but I that we’ll continue to see strength as the year progresses.

Your next question comes from the line of Brian Johnson with Barclays. Please proceed. Brian Johnson – Barclays: Good morning.

Hi, Brian. Brian Johnson – Barclays: I want to ask a bit more of a strategic question for – it’s probably all three but maybe Alan and then Bob and Mark – as you look at North American margins a very simplistic analysis which I think as some investors often do is, look, your revenues were up. Apply a let’s call it 20% incremental margin and your margins should have expanded; they actually contracted a bit. Now, I would point out very good margins overall. Just when you kind of sit down and you look at budgets and you look at product programs how do you balance, well, we could maybe get to mid-teen margins with, okay, here’s what we ought to be investing in, both product content right now as well as future product developments. What is that trade off and is there an explicit kind of margin constraint or margin feeling you build into those?

Okay, Brian, I’ll take a shot first. Very, very good question, but first let’s acknowledge fabulous results, fabulous margin, great consistency over a number of quarters so clearly running on all cylinders in North America which is presently the backbone of the results. I think what you’re seeing first of all is you’re seeing strength of the brand, you’re seeing strength of the products and the great refresh rates that we’ve got and I already touched on some of the individual performance by vehicle line just a second ago. The pricing is holding up and the team is doing a very good job in terms of being very disciplined on that as well as on matching production to demand, and of course the great cost structure is continuing to bear fruit for us. Now, what we saw in the first quarter, and we kind of touched on this a bit I think in the January earnings call is we are seeing costs go up at a rate that, in the first quarter...we’re holding the margin down from I’ll call it just a pure leverage effect flowing through. And it’s really around the fact that particularly in the first quarter, remember we added the 400,000 units of annualized capacity of last year? Most of that happened after the first quarter; now we’ve got all those shifts in place. We also are continuing to invest very heavily in engineering for new products and I also touched on the noncash kind of unique items that we were going to see effect the bottom line this year around OPB and pension and the asset impairment from 2008 as that ran off. The other thing that you’re seeing in the results in the quarter is we have about $300 million of bad news on mix in the quarter which is actually good because what it says is we’re being successful in our strategy to sell more in terms of the smaller vehicles, smaller and medium size vehicles, again touched on the success that we’re having there. So that along with the costs that I touched on which is largely for growth this year and in the future is what is keeping the margin at sort of that fantastic level of 11% in the quarter. Brian Johnson – Barclays: And do you debate about whether you should dial back some of those investments that give more margin to shorter term?

Well, we clearly expect to continue to get a great margin going forward. We’ve guided in our mid-decade outlook of just to an 8% to 10% margin which as I mentioned a number of times in the past is a very, very strong margin in the automotive business on a consistent basis. That’s sort of a cycle average type of number. We’re going to continue to invest because we believe we have great growth opportunities not only in places like Asia Pacific and some of the other growing markets of the world but here in North America and what I touched on was in the coast and in the southeast. We under-index our share in that part of the country. And the type of products that I touched on earlier around the super segment are starting to bear fruit. A lot of the share growth that we actually saw in the quarter came from those regions as opposed to the sort of Great Lakes, central part of the country which has been our historical core strength. So that’s all good and we think it’s the right call to make to continue to invest in future growth.

Your next question comes from the line of Matt Silver with Guggenheim. Please proceed. Matt Silver – Guggenheim: Thanks for taking my question. I just wanted to get some color on Europe. It looked like you downgraded the sales decrease to about negative 3.5% to 7% down 2013 versus 2012 which makes a lot of sense. But I’m wondering if you could give us some color on what you would, what signs you see that would lead you to the higher end of that range because it seems like things have sort of accelerated in a worse direction. The second thing on that is there was a stock build of $400 million favorable verse last year. I know it’s difficult measuring these on a year-on-year basis but could you give us a sense of where you and your dealer inventory fits in Europe? And then maybe you articulated this but what was the value of the D&A impairment in the quarter?

This is Sean. Let me just give you a couple of responses then we’ve got Steven Odell online and he can provide some of the additional color. First of all, the guidance that you see on the slide of 13 million to 13.5 million units is not a change in guidance. In January at the earnings call the slide showed 13 million to 14 million but we’d seen some indicators just before the call that caused us to make a verbal adjustment to that, that we actually shared with everyone on the call of lower end of 2013 to 2014 and that’s what we’re simply reflecting here. And we had a BofA conference that Joe Hendricks spoke to in New York in March and actually again reconfirmed the 13 million to 13.5 million. So that’s not a change in our guidance at all. What was the next point? Matt Silver – Guggenheim: In the context of that you had a stock build of $400 million, Bob. And I know it’s tough to do comparing versus last year but just what’s the sense of your stocks and your dealer stocks right now?

Yeah. Well, the dealer stocks – and Stephen can add – the dealer stocks are in great shape. We talked in the fourth quarter about doing a strategic stock reduction and we basically have gotten there with that. We’re in a low 40 day supply range in terms of that. What you’re actually seeing, we only had 13,000 units of stock change in the quarter. Last year we had a stock reduction of 20,000 units so it’s the change in the change if you will that’s generating the $400 million of the total company, I’m sorry. I thought you were talking about Europe. Yeah. In the case of total companies that’s what you were talking about. Matt Silver – Guggenheim: No, I was talking Europe.

Okay, yeah. So that’s what happened. It’s actually, it’s a non-repeat of the stock reductions that we saw last year which we actually said in January would be one of the positive factors that you’d see in our results this year and that’s what’s coming through.

Stephen, do you want to add anything else?

Just two quick comments. The industry in the first quarter ran of about 13.2, 13.3, so it was right in the middle of our guidance. And April, although not finished yet, is running at the same sort of level. So we’re pretty comfortable with the full-year industry guidance. And one important business factor coming out of the reduced dealer inventory – because the dealers are running about 40 days’ supply, it differs by market – is that now we’re actually getting dealers press us for units that we hold so, then as opposed to us pressing them, and that’s a significant change in business operation and helpful in the regard of also performing better on retail penetration. We just added 8,000 units of Kuga production because the dealers want to sell more units, up to 100,000 units out of Valencia. So it was exactly the right thing to do from a business perspective but also from a long going operating perspective. Matt Silver – Guggenheim: Thank you very much. And then last thing’s on that D&A impairment. What was the value of that in the quarter in Europe?

Yeah. If you go to the slide on Europe, which is, let me just find it here, go to Slide 16, Matt. And what you can see to the far right is we show the restructuring costs that we incurred in the quarter was $110 million. You can see structural costs were $83 million, the majority of that I think at around $80 million or so was the accelerated depreciation.

Your next question comes from the line of Rod Lache with Deutsche Bank. Please proceed. Rod Lache – Deutsche Bank: Good morning, everybody.

Morning. Rod Lache – Deutsche Bank: Couple questions first of all on structural costs; they were up $900 million for the company this quarter. Can you talk a little bit about your expectations for the year and within North America, $500 million yet a very good 17% increase in wholesale volumes that covered that this quarter but the production comps obviously get a little bit tougher over the next few quarters because you had capacity expansions in the middle of last year? So maybe just some broad comments on what we should be expecting in terms of structural costs.

Thanks for that, Rod. Yeah, we mentioned in January that we expected the structural costs to be increasing at a rate that exceeded last year. We didn’t provide any specific numbers, I’m not going to do that today but you can already start to see it come through in the first quarter. And when you look at the roughly $900 million increase on a company basis the way to think about that is we kind of break it down not by sort of areas of the business but sort of causal factors. About 30% of that is related to volume this year to support shifts over time sourcing work pattern changes and so forth. About 40% I would call future growth and a lot of that is around the engineering expense that’s going up as well as the investments in the branch or the advertising sales promotion which a part, by the way, is volume related directly. And then you’ve got about a quarter or so that is European restructuring and then some of these unique things we talked about in January around, in North America in particular, OPB, the asset impairment runoff and then Europe and North America on the pension side. So those are the factors and I think you’ll see that pattern continue through the course of the year and we will see higher levels of cost increases as the business grows, as we respond to the needs of our business to support higher shares and higher industries and the expanded product line going forward. Rod Lache – Deutsche Bank: Okay, and just two more things. In Europe it sounds like you’re not assuming any material increase in the sales pace but could you just comment on whether you have any expectations for improving country mix or Ford share in the guidance you’re providing? And then lastly just a question related to China. Are there royalties that are being received in some your other regions? I know that the China earnings specifically are not material because of the investment but are you receiving royalties in your other divisions that would be material to the other regions?

Yeah. In the case of Europe we came in at a 7.7% share in the quarter. We’re guiding to a share that’s flat for the full-year more or less which was 7.9% last year so we clearly expect to do better as we move forward in the balance of the year. And again, you didn’t ask this question but I just have to underscore the good things that are going on in that number. The team has delivered, as we said in the comments earlier, a retail share increase which as you know from following North America was a critical part of the turnaround of our business here. And to achieve that in the first quarter right out of the gate is just absolutely fantastic and particularly in the environment that we’re in. And if you look at the pricing, pricing was basically flat, negative $23 million on the size of the business that is and by the way good news compared with the fourth quarter. So doing very well there and being very disciplined to take down the share in those other segments. We didn’t see a share increase in net fleet which we’re targeting but that was because largely the Genk facility was not producing much during the quarter. So really, really good results there and we do expect as new products roll out and we get more availability of new products that we’ll see better shares as the year progresses. Maybe by quarter we’ll be up and down a bit, I don’t know, but we’re going to do better as we go forward. And on the royalties we are seeing royalties come through from the Chinese joint ventures. That’s the major factor but we also see royalties coming from our joint ventures on autos in particular and smaller levels of royalties elsewhere, but China would be the major one and autos on it a bit and Russia as well.

Your next question comes from the line of Peter Nesvold with Jefferies. Please proceed. Mr. Nesvold, your line is open. Peter Nesvold – Jefferies: Sorry, had it on mute. Good morning. Perhaps a related question to Brian’s question on operating leverage, a little bit about Rod is talking about on China. We look at APA, the revenues doubled in the last five years or so to $10 billion. The segment income is still roughly break even. I know the re-investment rate is very high in that region right now. Is there any way you can help us think through what that region looks like looking out two years, is it three years; at what point does the re-investment start to taper off and how should we think about what kind of earnings contributor that particular region could be looking at a few years from now.

Okay, thanks for the question, Peter. And the questions on leverage are completely understandable. On the question of APA, we have said previously that by mid-decade it’s going to represent a really material portion of the overall company’s profits. Because by then, we will – we have under construction right now seven plants as I mentioned; five in China and two in India. We’ve got a lot of engineering underway that we’re incurring the cost for today. That’s going to substantially expand our portfolio and the number of segments that we participate in across the region. So that’s kind of where we find ourselves. We were very delicately balanced between that very strong growth and then the investments which will pay off in the next several years. But I think we’ll start to see next year the region contribute more meaningfully. But certainly by mid-decade it’s going to make a big difference in terms of the bottom line of the company. Peter Nesvold – Jefferies: And then as a quick follow-up, can you just update on us where you are in localizing production in South America? Historically that was a region that could contribute as much as $1 billion in pre-tax. At what point do you think you’ve localized enough that you can start to generate growth in that region outside of just the cycle. And is there any way of framing perhaps what level of production you’ll have in that region versus past peak sales volumes so we could try to think through what kind of profit contributor that could be in a few years? Thank you.

Well most of the volume that’s sold there is actually built because of the very high tariff barriers that they have in place in all the key markets. We are rolling out all new products, global products that will replace our legacy products. We’re planning to increase our market coverage from 67% today to about 82% by 2015. So that will contribute not only to absolute growth but we think a strong relative position in the marketplace. What you’re seeing this year is extremely challenging conditions in Venezuela which I think everyone is – understands. But we’re also seeing issues in terms of the economy in Argentina. So I think we’re starting to move past – I mean the trade restrictions we have reacted to, putting the Fiesta, the refreshed Fiesta into Brazil. Actually we were planning to do that before those changes but that will clearly help us. But we’re in – it’s in progress of being launched right now. So I think we feel good about our plan for South America but we’ve just got to work through these issues that we’re suffering from in terms of exchange rates. You can’t price for that much exchange overnight. And so, you’re going to have to continue to work our way through that over the course of the year and beyond. Peter Nesvold – Jefferies: Great. I’ll leave it at that. Thank you.

You’re welcome.

Your next question comes from the line of Adam Jonas with Morgan Stanley. Please, proceed. Adam Jonas – Morgan Stanley: Hi, everybody.

Hi, Adam. Adam Jonas – Morgan Stanley: Hey. So Alan, I’ve got to ask you about the Japanese yen. On January 29th on your 4Q call I asked about it when the yen was just over 90 and you mentioned that you felt there were conversations with the U.S. government on how to encourage the free market to set FX rates and you were kind of encouraged by that. I was curious now with it now pushing 100 how your thoughts have changed. Have you seen any signs of either behavior changing amongst your Japanese competitors or if that pace of discussion is intensifying?

Sure, Adam. Really important cell and I am still very much encouraged because since we talked the U.S. government has also continued that dialog with Japan. It’s also included in the discussion about the Free Trade Agreement with the TPP and again, I’m very encouraged to see just the conversation about letting the markets set the exchange rates, being part of those free trade agreements also. So clearly this affects everybody around the world and I’m confident that we’re going to work this out to get back to real based trading. With respect to the near term we haven’t seen the effect of that yet in a big way but clearly that would put many people at very much of a disadvantage if that continues. So I’m very encouraged that we’re going to continue to work this between government-to-government. Adam Jonas – Morgan Stanley: Thanks, Alan. And Mike, I’ve got just one follow up question for you about the CSPB, Consumer Finance Protection Bureau, where these rules went into enforcement on the 21st of March and is one of the largest automotive lenders here in the United States. Are you seeing any changes in how you’re communicating and working with your dealers? Can you comment on the level of surveillance or any changes of the brackets in terms of the dealer markup and just comment broadly on the risks you think this could add to your business.

Okay, Adam. Well first, we’re not subject to CSPB examination at this time because there is no larger market participant rule. Now that said, Ford Credit is absolutely committed to compliance. It’s part of our culture. Our goals are all built around long term relationships with our customers so that they become repeat Ford customers in the future. All of our contract decisions are based on objective data. As it relates to dealer compensation the CSPB has stated that auto dealers provide a valuable service in helping customers with financing and they should be compensated for this. We agree and obviously we’ll follow and watch as this develops in this space. Adam Jonas – Morgan Stanley: Interesting. That’s fascinating, Mike. So you’re saying you’re not subject to surveillance at this time but you could be, couldn’t you?

We could be, and there is no larger market. Adam Jonas – Morgan Stanley: So if this were to continue where you’re not subject to it but Wells Fargo, J.P. Morgan, and everybody else is, then you’re going to gain – potentially you could have a pretty significant market share opportunity as our understanding from the conference calls of your third-party financial services peers, this is a major, major issue for them.

We continue to follow the developments and obviously we will do whatever – we will follow whatever the legal rulings ultimately become because it is our goal to be compliant with all laws. Adam Jonas – Morgan Stanley: Okay. Love to follow-up with you after the call on this if possible?

Okay.

Your next question comes from the line of Ryan Brigman with JP Morgan. Please, proceed. Ryan Brigman – JP Morgan: Hi. Good morning. Thanks, for taking my question. Maybe just a little bit more on South America, obviously there was a lot of noise there this quarter with regards to currency. You’ve already given some color on that. But it also looks like something, maybe somewhat material, running through the other, other lines. So perhaps you could just firstly shed some light on that? And then secondly, your volume mix and your net pricing contribution there in 1Q was essentially offset by the higher contribution in other costs. And yet, your full-year breakeven guidance implies a $218 million rest-of-year profit. So something should be getting there in the remaining quarters of the year. What do you think it is that changes? Is it that your volume or your mix gets better or your pricing which already seems strong or is it more than maybe cost is less of a headwind? Thanks.

Hi. This is Mark. Great question. As Bob mentioned earlier, what we won’t see in the rest of the year are assumption is the impact of the devaluation of the bolívar. But what’s driving some better performance in the rest of the year is we’re going to be launching our new Fiesta into the marketplace. And also, a little later this year, our new Focus so that will complement the performance our new EcoSport and Ranger and that will drive revenue and we expect some share performance. Secondly, the thing to keep in mind, in the first quarter volumes are usually the lowest. And the reason for that is you have the plant shutdowns for, particularly Carnaval in Brazil, which don’t experience later in the year so those are the factors. Ryan Brigman – JP Morgan: Okay. And then maybe, just to finish with a more strategic question on Europe, one element of your restructuring plan there that differs from at least one of your rivals is that while you’re also taking facility cost out, at the same time you plan to increase investments and structural spending in other areas to aggressively tackle that market which is think is always typically the right thing to do. But of course we’re all tempted to think that vehicle sales and production in Europe it’s at this very abnormally low level and it’s going to inevitably rebound. Registrations there just continue to slip further than expected, I’m curious if you knew that the industry would not improve over the next several years, would that somehow cause to want to shift your strategy with regards to structural spending in the region?

Well that’s a good hypothetical question and we’ve run lots of scenarios internally as you might imagine. But our plan, our 50/50 call is in fact that we’ll see very modest growth in the industry and in economic conditions there. And on that basis as well as just what we know is helpful for the business which is to invest in product, regarding what the external conditions are that we’ve got the right plan. Now as you said, that is a possibility, the scenario that you outlined. And as you’ve seen from us in many parts of the world and many parts of our business we will constantly look at the external environment and we will adapt as appropriate based on what is coming at us. But we think we’ve got...so far the call we’ve made for the year appears to be pretty good and as I said some of the indicators as we look further ahead suggest we could be bottoming out and perhaps this very modest improvement in the external environment we might see evidence of that later this year, early next year. Ryan Brigman – JP Morgan: Okay, thanks, guys, and congrats on the great North American results.

Thank you.

We will now take questions from the media. (Operator Instructions) Your next question comes from the line of Dee-Ann Durbin with Associated Press. Please proceed. Dee-Ann Durbin – Associated Press: Good morning. Thanks for taking the question. I’m wondering if you can talk a little bit about Lincoln. You were shipping Lincolns to Flat Rock during this quarter. I’m assuming that, that is finished but I’m curious if we’re going to see any more expense for that and also are we going to see any additional expenses for a new marketing campaign now that the vehicles are actually on the ground?

Sure. Jim, you want to take that?

Thanks for your question. The stock for Lincoln dealers on MKZ is still doing really nicely. Second half of April we started to get very normal levels of stock. The product MKZ especially is turning very well right now. We’re really happy with the sales results. Obviously we have a few more weeks to close the month but I think you’ll see in our sales results that the product is being extremely well received. The hybrid mix is much stronger than we thought. The sales on the coast are much stronger than we thought and we should have a really great story to tell at the end of the month.

Your next question comes from the line of Craig Trudell with Bloomberg News. Please proceed. Craig Trudell – Bloomberg News: Hi. Thanks for the opportunity. I had a question for Mr. Fields that I pulled up the conversation that you had with some of us after showing the Atlas concept in January. You were talking about the next generation F-Series, and you said that you’re going to push, I think the words were, appropriate limits in all elements of the vehicle to maintain leadership there. Are we seeing in, within the engineering expense a push by Ford to spend on this to make sure that this vehicle remains a leader?

Thanks for the question. Overall, as you said, we’re very proud of the fact that the F-Series remains a leader in the segment. And as you heard from Bob’s comments earlier, when you look at some of the structural costs, a number of those structural costs were in the engineering area for new products. So clearly, as we work on our future products, including next generation F-Series, it’s inherent in those numbers. And I think the key is making sure, as we manage that business, we manage it appropriately. And I think if you look at it this year, our stocks are in good shape, our transaction prices are up over $1,100, and we’re at the top on transaction prices in the segment. So I think we’re managing the business appropriately. And we’ll do that to keep our leadership position for the current product and any future product going forward. Craig Trudell – Bloomberg News: Great. And if I could have just one follow-up question, actually for Mr. Odell. I wonder about the pricing environment in Europe. You guys did pretty well on pricing in the first quarter it appears. I wonder what your outlook is for Ford specifically and for the industry, how the industry is performing from a pricing standpoint and how it might perform going forward?

Okay. Thank you. That’s pretty tough to predict other than, with industry levels running in the, between the 13 million and 13.5 million in capacity, considerably above that in the industry, we should expect, and indeed we are very competitive levels of spend. Just to confirm, although I’ve seen something to the contrary, just to confirm, we are actually below industry average for volume manufacturers on the spend which is part of why you saw our net pricing being basically neutral in the down industry. And one of the ways that we can achieve that is by driving business towards the more profitable segments like retail business. And we intentionally took down rental and demo business in the first quarter, about 20,000 units in total, which we elected not to pursue, partly through margin, but also because it, not doing so, allows us to richen our mix toward retail. And that’s obviously helped by the new product deliveries coming through at a much accelerated pace. So my perspective would be, if the industry remains in that band width, to be as competitive as it currently is, but of course, it’s very volatile so we’ll remain competitive but we are selective in where we chose to do our business. Craig Trudell – Bloomberg News: Thank you.

Your next question comes from the line of Alisa Priddle with the Detroit Free Press. Please, proceed. Alisa Priddle – Detroit Free Press: Good morning, gentlemen. I just wanted to ask you about there was talk about negative pricing due to the mix in the quarter. And I’m wondering how that might track for the rest of the year and whether you think that higher incentives are potential on pickups or other vehicles going forward?

Alisa, its Bob. Let me just clarify one thing. Thanks, for the question. When I was talking about the mix effect being negative that is not pricing. That’s just the fact that we sell more vehicles that have lower margins than, for example, an F Series so it gives us an average negative mix affect in that regard. But as I said, that’s simply a reflection of the success that we’ve had in selling those vehicles. So as we look ahead for the balance of the year, I think we would expect to continue on a year-over-year basis to see that adverse mix in North America which again think of it as a very positive because it just simply means we’re being very successful with these new products in the smaller, medium-size segments. Alisa Priddle – Detroit Free Press: And do you see incentives becoming a factor going forward especially in pickups?

Well as you look at our – we’ve been very, very, very consistent. Our incentives don’t kind of – they’re not particularly volatile. We might be tactical in any given month on any particular product. But on average, our incentives month-to-month-to-month have been very, very consistent. One thing that – it came up in earlier question that we’re going to have to watch very closely is what happens competitively as the Japanese competitors are able to benefit from the weak Yen. We are starting, around the world not just in North America, very selectively and very early to see some signs that they’re taking advantage of that. But it’s a little bit too early to make any particular forecasts around that other than we need to really focus on costs because we know that that’s going to be important regardless of however they chose to handle that. Alisa Priddle – Detroit Free Press: Okay. Thank you.

(Operator Instructions) Your next question comes from the line of Mike Ramsey with the Wall Street Journal. Please, proceed. Mike Ramsey – Wall Street Journal: Hey. Good morning, everybody. Quick question was on the – as your platforms go down – Alan mentioned that you’re down to nine is going to produce 85% of your sales volume globally. And your margins continue to tick up. Is it possible to quantify how much that has contributed to your profitability in terms of reducing your platforms? Is there any way to quantify how much, like maybe over the past five years or even two or three years, how much more profitable each vehicle sale is because of your reduced platforms?

Well, I’ll just give you my perspective then maybe others can chime in. We’ve not quantified that externally. Clearly you can understand in the case of something like an engineering expense, it costs so much to engineer a vehicle, you can do that and then provide that vehicle to all four regions of the world and everyone is sharing in that engineering expense; clearly all parts of the business are benefiting. The other thing that we benefit from this isn’t just the cost side it’s large emission. We actually can more rapidly and more realistically expand our offerings around the world to a degree that we never have been able to in the past. And an example will be Explorer that we started to build in Russia. Focus in China. We actually wholesaled more in Focus in China in the first quarter than we did in Europe or North America. Who would have thought that just a couple of years ago? So we have so much greater ability to grow and expand the business because we can take this global portfolio and we can just pick and choose and decide where we want to place these products to take advantage of a particular market opportunity. Mark, do you have anything you want to add on that?

No, I think you covered it. Mike Ramsey – Wall Street Journal: And just real quick. This is going to sound like a silly question but Venezuela seems like such a small country yet it seems to be having such an out prized impact. Is that because of the Valencia plant being located there? Or can you explain why it has had such a significant impact on earnings?

Yeah, it has a significant impact. It is a very small part of the business. I think the industry’s only about 180,000 units and I think last year we sold maybe 23,000 units. The issue is that the exchange rate is controlled by the government and it’s artificially strong. So what they’ve had a history of doing in past years is they kind of periodically will do an official one time evaluation. Our balance sheet, because we have difficulty in getting cash out, we get exposed if you will on the asset side relative to liabilities and then when they devalue, suddenly we’ve got to sort of devalue that asset positive balance sheet and we take a hit when we do that. Mike Ramsey – Wall Street Journal: Okay. Thank you for that explanation.

I don’t know if you understood that, but that’s what makes it very, very tough in the marketplace. And more recently at this past evaluation there’s actually a press run on all the manufacturers who hold back on pricing, so it’s a very tough market and we’re just going to have to work our way through that. Mike Ramsey – Wall Street Journal: Thanks a lot.

Your next question comes from the line of Chris Ceraso with Credit Suisse. Please proceed. Chris Ceraso – Credit Suisse: Thanks for coming back. I had a couple of questions about seasonality in both North America and Europe and the progression throughout the year. Maybe in Europe first, I think typically you could have a stronger first half versus the back half because of downtime in Q3 and Q4. Should we expect a similar pattern this year? Or does the progression and the momentum that you’ll have in new product launches counter-balance that? What should we expect in terms of the cadence throughout the year?

Well Chris, I understand why you’re asking that question. I would too if I were in your shoes, but I really, really am reluctant to say anything that would be interpreted as a forecast of any particular quarter for any particular region. You’re correct in looking at history that in general the first half will be better than the second half, and that has to do with the long vacations in the summer and that type of thing. But we’re in kind of a different place in terms of the restructuring. The restructuring, I think, will hopefully continue to build on the fabulous results that Steve and the team have delivered in the first quarter. We’ve got a lot of new product that have yet to be fully reflected in the marketplace. It’s possible that as we said earlier you could see a little bit of tilting upward, if you will, in terms of economic and industry conditions toward the latter part of the year. So I really would hesitate to make any forecasts on a quarterly basis for Europe in particular. Chris Ceraso – Credit Suisse: Okay. Those are all helpful points. Maybe similar without giving us the answer, some comments about North America; the different cost items that came in, is that stuff all relatively steady as you go throughout the year? I know pension expense usually is pretty consistent quarter to quarter, and I’m guessing the changes in your D&A and so forth are pretty consistent quarter to quarter. Are there any expense items that are going to travel up or down relative to what they were in Q1?

Well I mean obviously engineering isn’t flat by quarter, and then on a year-over-year basis, as I mentioned earlier, some of the things that are affecting us in the first quarter have started to come into play last year as those quarters progressed. Warranty is lumpy because we do have different periods where we kind of true up the reserves based on the maturity of the time and service for the vehicle lines, so that can be lumpy. But in general those are probably the exceptions I think. Chris Ceraso – Credit Suisse: Okay. And then just the last item on pricing, maybe at a high level, your expectations for North America and Europe in terms of price, maybe focusing on your view of competition and your view of the current status of supply/demand in the market?

Well, for total company we expect the year to offer positive pricing to the bottom line. We do think that North America will be a significant contributor to that, of course with the caveat that we’ll have to continue to watch and monitor what happens here as the competitors that benefit from the weaker currencies do or don’t take advantage of that, and it depends on how they do that. I think I the case of Europe, as Stephen pointed out, just doing a great job of holding the line, and I think as the year progresses, if we can come out the year having done that, I think that will be a great step forward for us, and I think we will see positive pricing in the other parts of Ford.

Your next question comes from the line of Itay Michaeli with Citigroup. Please proceed. Itay Michaeli – Citigroup: Great. Thank you. Good morning. So just wanted to ask the North America cost question a bit differently, Bob. Should the year-over-year comparisons, in terms of the cost headwind get a little bit easier for you in the back half of the year once you lap the capacity increases for next year, or is this sort of year-over-year headwind indicative of the rest of the year?

Well, again, I don’t want to provide a quarterly forecast I think you’ll see increases decay on a year-over-year basis for each quarter, and it probably will vary a little bit as we go forward for the total company, and again for some of the reasons I just mentioned. You know, the counterization of engineering. As those capacity increases came in, as we continue to make further investments for growth, not for this year but for forward years. So, I think it’s. You can expect cost increases, but I think it’ll vary by quarter. Itay Michaeli – Citigroup: Great. And then two quick questions on Europe. One, the second quarter production schedule was a little bit stronger than what we would have thought. Could you talk a little bit about that. Is that some of the Kuga ramp impacting that number? I think you’re calling for actually an increase year-over-year. And then, do you have a sense yet of, or can you provide the date for the Mondeo launch next year in Europe?

Yeah. Maybe Stephen can handle that.

Sure. Thank you. What you’re seeing in the second quarter is in part, as you referenced, incremental Kuga production. Not only are we ramping up, but actually we’re looking to ramp up at a faster pace to try and match demand. You’re also seeing full production out of Genk since we reached the agreements that Bob alluded to earlier on. The plan has produced, actually pretty much on schedule every day, and our expectation is that will continue through the second quarter.

Monday.

Oh, I’m sorry, Monday launch. We’re looking at probably the fourth quarter of next year. Remember, that we still in the information and consultation period with the Belgium unions, and that would allow us to cease production in Belgium subject to agreement in September of next year, and obviously we’d then have to run POP production in Valencia, so it would be some while after that period. Itay Michaeli – Citigroup: Great. That’s very helpful. Thanks so much, guys.

Thank you.

Your next question comes from the line of Joe Speth with RBC Capital Markets. Please proceed. Joe Speth – RBC Capital Markets: Good morning and thanks, everyone. Just maybe another way to ask North America. Given the current capacity you added and your current outlook for industry but also potentially some share gains, when do you envision approaching the level of utilization that you had early 2012 when you had to sort of think about adding some more capacity?

Well, we’ll not fully utilizing our capacity right now and in some plants we are, but we’re not overall in the system. So we still have a little bit of flexibility around that regard. Obviously if there’s a need and we’re able to use that capacity we’ll do so but we wouldn’t have anything to say about that now. I’m sorry. Someone just reminded me, which I should mention. We have announced specifically the added shift coming onto Flat Rock for the Fusion. That will be in the second half of the year. Joe Speth – RBC Capital Markets: Okay. And then just, you touched on this a little bit but circling back to Europe you noted that pricing wasn’t that much of a headwind but we have heard some horror stories on pricing out of there. So is that, that Europe pricing isn’t necessarily getting worse? Are you maintaining some discipline or maybe you could just provide a little bit of color there. And then also on the mix factor in Europe. You said retail share gains, which I would think would be a positive mix for you unless it’s being captured somewhere else, so is that a factor that can turn positive throughout the year if that trend continues?

Yeah. Stephen, do you want to handle that?

Yeah. We see the pricing outlook as I tried to answer earlier on as stable. It’s obviously very competitive, more competitive than it’s been probably ever but stable at that level unless something significant happens to spook the markets. As Bob said, could be that we see we reach the trough later in the year and then, or later this year early next year, and then we start to see a gradual return and that would obviously help pricing. Joe Speth – RBC Capital Markets: And on mix, we have adverse mix in Europe in the quarter, a lot of that around the lack of the availability of the CD vehicles to the extent that the market would demand, and as Stephen said that has now been addressed with the plant back up and producing as of the latter part of March. So for the full year we would expect the possibility of having positive mix effects in Europe.

And, Bob, if I can just add to that. Not only have we got Genk back up and producing, but we’ve also effectively re-launched the current Mondeo with probably a stronger bias towards retail. It now meets certain benchmarks, below benchmarks on tax incentives for CO2 and more equipment at the same price, so completely agree with the comment.

This is all the time we have for questions. I would now like to turn the call back over to Mr. George Sharp for any closing remarks.

Thank you. Thanks, everyone. That concludes today’s presentation. We’re really glad that you were able to join us this morning.

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.