Ford Motor Company (F) Q4 2013 Earnings Call Transcript

Alan Mulally - President and CEO Robert Shanks - Executive Vice President and CFO Mark Fields - Chief Operating Officer Stuart Rowley - Corporate Controller Neil Schloss - Corporate Treasurer Paul Andonian - Director Accounting Mike Seneski - Ford Credit CFO George Sharp - Executive Director, IR

Adam Jonas - Morgan Stanley Brian Johnson - Barclays Joe Spak - RBC Capital Market Matthew Stover - Guggenheim John Murphy - Bank of America Merrill Lynch Ryan Brinkman - J.P. Morgan Rod Lache - Deutsche Bank George Galliers - ISI Group Itay Michaeli - Citigroup Craig Trudell - Bloomberg News Alisa Priddle - Detroit Free Press Karl Henkel - The Detroit News Mike Ramsey - Wall Street Journal Dee-Ann Durbin - Associated Press Joann Muller - Forbes Emmanuel Rosner - CLSA

Good morning, ladies and gentlemen. And welcome to the Ford Fourth Quarter Earnings Conference Call hosted by Executive Director, Investor Relations George Sharp. My name is Julie and I am your event manager. (Operator instructions) Now I’d like to hand over to George Sharp. Please go ahead.

Thank you, Julie, and good morning. Welcome to everyone joining us today either by phone or 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 fourth quarter and full year 2013 financial results. Presenting today are Alan Mulally, President and CEO of Ford and Bob Shanks, Chief Financial Officer. Also participating are Mark Fields, Chief Operating Officer; Stuart Rowley, Corporate Controller; Neil Schloss, Corporate Treasurer; Paul Andonian, Director of Accounting; and Mike Seneski, Ford Credit CFO. Copies of this morning’s press release and presentation slides are available on Ford’s investor and media website. Please note that the financial results discussed today are preliminary and include references to non-GAAP financial measures. Final data will be included in our Form 10-K and any non-GAAP financial measures are reconciled to the U.S. GAAP equivalent in 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 be different. The most significant factors that could affect future results are summarized at the end of this presentation and detailed in our SEC filings. With that, I’d now like to turn the presentation over to Alan.

Thank you, George and good morning to everyone. We are pleased to review our fourth quarter and full year 2013 business performance and the progress we continue to make in delivering our One Ford plan. We will also reconfirm today our major plan assumptions and key metrics for 2014. Let’s turn to the first slide, please. The foundation of everything we do is our One Ford plan shown here. Across the Ford enterprise, we continue to aggressively restructure the business to operate profitably at current demand and the changing model mix to accelerate development of new products our customers want and value, finance our plan and improve our balance sheet, and work together effectively as one team leveraging our global assets. Our commitment remains to serve customers in all markets with a full family of best-in-class vehicles, small, medium, and large cars, utilities, and trucks, delivering profitable growth for all. We continued to make good progress towards this goal in the fourth quarter, which we will now review starting on slide two. The company had a solid fourth quarter, achieving our 18 consecutive profitable quarter. Automotive operating-related cash flow was positive and liquidity remains strong. The topline grew year-over-year for the fifth consecutive quarter, with market share gains both in the U.S. and in Asia-Pacific and Africa where we realized record share. Among our business units, North America delivered a strong profit, Asia-Pacific and Africa earned a record profit for the fourth quarter, South America incurred a loss as expected and Europe reduced its loss compared with last year. Ford Credit once again contributed solid profits. For the full year, the company’s pre-tax operating profit was among the best in our history and automotive operating-related cash flow was a record. These full year results reflect an automotive sector and operating profit that was the highest in more than a decade, with record profits in North America and Asia-Pacific and Africa, and about breakeven results in South America and a loss in Europe -- and a lower loss in Europe than last year. Ford Credit was solidly profitable. Volume and revenue grew compared to last year with market share gains in the U.S., South America and in Asia-Pacific, which was driven by record market share in China. Retail share was also higher in Europe. Our global pension plans funded status improved about $10 billion compared with year end 2012. Global pension plans were underfunded by $9 billion at year end 2013. Our outlook for 2014 remains unchanged from what we communicated in December. We continue to expect automotive revenue to be about the same as last year. Automotive operating margin to be lower and automotive operating-related cash flow to be positive but substantially lower than 2013. Total company operating profit expected to range from $7 billion to $8 billion. Before turning to the financials in detail, let's recap some of our other achievements from 2013. On slide three, during 2013, we launched 11 all-new or significantly refreshed products globally. The next-generation Mustang was revealed in six cities on four continents, based on latest available Forbes data, Focus was the world's best-selling nameplate and Fiesta was the world's best-selling subcompact car through the first nine months of the year. In the U.S. the F-Series achieved truck sales leadership for the 37th straight year and vehicle sales leadership for the 32nd year in a row. In Europe we announced plan to accelerate our product launch plan to at least 25 vehicles in the next five years. In China, our joint ventures opened two new plants and we announced plans to bring two new global products to JMC. For the Middle East and Africa, our new business unit, we announced plans to launch 17 vehicles over the next two years to accelerate growth in the region. Consistent with our plan to provide regular growing dividends that are sustainable over an economic or business cycle, we doubled the dividend in 2013 and as you know, we announced an additional 25% increase earlier this month. In the U.S. we will pray record profit sharing to our employees for 2013. And finally, we received an investment grade rating from S&P. With this upgrade four of the major rating agencies that rate us now report Ford and Ford Credit as investment grade. Bob Shanks will now take us through the details of our financial performance in the quarter and for the full year. Bob?

Thanks, Alan, and good morning, everyone. Starting at the top of slide four, fourth quarter wholesale volume was $1.6 million units, up 76,000 units or 5% from year ago. And revenue was $37.6 billion, up $1.3 billion or 4%. Pre-tax profit was $1.3 million, excluding special items, $402 million lower than a year ago. After-tax earnings per share at $0.31 were unchanged. Net income attributable to Ford, including pre-tax special item charges of $311 million and favorable tax special items of $2.1 million was $3 million, $1.4 million higher than year ago. Earnings were $0.74 a share, up $0.34. Automotive operating-related cash flow was $0.5 billion, marking the 15th consecutive quarter of positive performance. Automotive gross cash was $24.8 billion, exceeding debt by $9.1 billion. For the full year, vehicle wholesales increased by 12% from a year ago and revenue improved 10%. Pre-tax operating profit, excluding special items, was $8.6 billion, a $600 million improvement. Net income was $7.2 billion, $1.5 billion higher. Slide 5 walks our pre-tax operating results and net income. And we’ll focus here our comments on the fourth quarter. As just mentioned, total company pre-tax operating profit was $1.3 billion. Pre-tax special item charges of $311 million included $156 million for separation-related actions, primarily in Europe, to support our transformation plan, and $155 million associated with our now completed U.S. salaried lump sum payout program as part of our pension derisking strategy. You can find additional detail on the special items in the Appendix 3 and on the pension derisking in Appendix 6. We also benefitted in the quarter through $2.1 billion of tax special items, including the impact of a favorable increase in deferred tax assets related to investments in our European operations and the release of valuation allowances held against U.S. state and local deferred tax assets. In addition, Ford Credit tax liability was reduced. As a result, net income attributable to Ford was $3 billion. For the full year, our operating effective tax rate, which isn’t shown, was 27%. Looking ahead to 2014, we expect the rate to normalize at about 35%. As shown on Slide 6, both of our sectors, automotive and financial services, contributed to the company’s fourth quarter and full year pre-tax profits. Total company fourth quarter pre-tax profit of $1.3 billion was $402 million lower than a year ago with both sectors declining. Compared with third quarter, total company pre-tax profit declined $1.3 billion, nearly all in the automotive sector as shown in the memo. Total company full year pre-tax profit of $8.6 billion increased by $600 million from last year explained by the automotive sector. The key market factors and financial metrics for our total automotive business in the fourth quarter are shown on Slide 7. As previously mentioned, automotive fourth quarter profit was driven by continued strong performance in North America and record fourth quarter profit in Asia Pacific Africa. Wholesale volume and revenue, both increased from a year ago. The higher volume primarily reflects higher industry volumes in all regions and higher market shares in North America and Asia Pacific Africa. Lower dealer stock increases this year compared with a year ago were a partial offset. The higher net revenue reflects favorable mix, higher net pricing and the volume increase. Operating margin of 3.1% was seven-tenth of a percentage point lower than a year ago while automotive pre-tax profit was $924 million, down $338 million. As shown in the memo below the chart, full year wholesale volume and revenue were higher than a year ago by 12% and 10% respectively. Operating margin at 5.4%, and total automotive pre-tax profit at $6.9 billion were also higher. Slide 8 shows the factors that contributed to the $400 million deterioration in total automotive fourth quarter pre-tax profit. Higher costs, mainly structural, and unfavorable exchange were offset partially by a favorable market factors in all regions. The cost increases mainly reflect investments for higher volume, growth and new products, both for this year and the future. As shown in the memo, pre-tax profit was $1.4 billion lower than the third quarter, more than explained by higher costs, including the seasonal increase in structural costs as well as higher warranty costs in North America. You can find more details on the quarter-to-quarter change in Appendix 10. Slide 9 shows fourth quarter pre-tax results for each of our automotive operations as well as other automotive. Automotive sector profit of $924 million was driven by North America and Asia Pacific Africa with losses in both South America and Europe. Other automotive is mainly net interest expense. On Slide 10, we show the factors that contributed to the $600 million improvement in total automotive full year pre-tax profit. Favourable market factors across all regions were offset partially by higher costs, mainly structural, and unfavourable exchange principally in South America. Full year pre-tax results for each of our automotive operations as well as other automotive are shown as Slide 11. North America and Asia Pacific Africa delivered record results while South America was about breakeven and Europe incurred a loss as expected. All regions improved compared with a year ago with the exception of South America. Other Automotive reflects net interest expense, offset partially by fair market value adjustment of our investment in Mazda. Now, we'll look at each of the regions within the automotive sector starting on slide 12 with North America. North America continued to perform well in the fourth quarter, driven by a strong industry, a robust full-size pickup segment, our strong product lineup, growth in U.S. market share, continued discipline in matching production to real demand and a lean cost structure even as we invested more in product and capacity for future growth. As you can see in the two graphs on the left, North America wholesale volume and revenue grew modestly in the fourth quarter. The volume improvement reflects higher U.S. industry sales, increasing from a SAAR of 15.4 million to 16 million units and higher U.S. market share. Partial offsets were in favorable changes in dealer stocks and lower volume in non-U.S. markets. The higher revenue primarily reflects the volume increase and favorable mix. North America operating margin was 7.6%, down eight tenths of a percentage point from last year, while pre-tax profit was $1.7 billion about $200 million lower than last year's record profit. As shown in the memo below the chart, North America’s full year wholesale volume and revenue both improved 11% compared with last year. Operating margin was 9.9%, half a percentage point lower than a year ago, while pre-tax profit was $8.8 million, up about $400 million. On slide 13, we show the factors that contributed to North America’s fourth quarter pre-tax profit decline of $200 million from last year. The higher costs, mainly warranty and structural, and lower net pricing were offset partially by favorable volume and mix. The higher warranty expense of about $300 million primarily reflects costs associated with the Escape 1.6 liter recall announced in the quarter. As shown in the memo, pre-tax profit decreased compared with third quarter, more than explained by higher cost including a seasonal cost increase in structural cost with favorable market factors and exchange and partial offset. Ford’s U.S. market share trends are shown on slide 14. Total U.S. market share and retail share of the retail industry, both improved in the fourth quarter and full year compared with the year ago. Both share metrics also improved compared with third quarter. Starting with the left chart, our total U.S. market share was 15.4% in the fourth quarter, up one tenth of a percentage point from the same period last year, more than explained by Fusion, F-Series and MKZ. Our share was up half a percentage point from third-quarter, explained primarily by higher Ford share of the fleet business as well as higher fleet mix of the total industry, which is typical in the fourth quarter. As shown in the right chart, our retail market share of the retail industry was 14% in the fourth quarter, up four tenths of a percentage point from last year, more than explained by Fusion, F-Series and Escape. Our retail market share was up eight tenths of a percentage point from third quarter, more than explained by F-Series, Explore and Fusion. And finally although not shown, we continue to have success with what we call super segment vehicles, small utilities and small to midsized cars, particularly on the coasts. Our full-year super segment market share was up eight tenths of a percentage point compared with last year with the coastal regions contributing three quarters of the improvement. Now, let’s turn to slide 15 and review South America where we are continuing to execute our strategy of expanding our product lineup and progressively replacing legacy products with global ONE Ford offerings. In the fourth quarter, wholesale volume and revenue decreased by 6% and 11% respectively from a year ago. The lower volume is more than explained by plant downtime in Brazil in preparation for new products in 2014 and lower production in Venezuela, resulting from limited availability of U.S. dollars. Our revenue decline in South America primarily reflects unfavorable exchange, volume and mix, offset partially by higher net pricing. Operating margin was negative 4.7% and pre-tax loss was $126 million. Both metrics deteriorated from last year’s profitable results. As shown in the memo below the chart, full year wholesale volume and revenue both improved 8% compared with last year. Operating margin was negative three tenth of a percent and the pretax loss was $34 million, both lower than positives results a year ago. On Slide 16, we showed the factors driving the $271 million decline in South America’s fourth quarter pre-tax result. Higher costs, unfavorable volume and mix, and unfavorable exchange were offset partially by higher net pricing. The higher net pricing reflects partial recovery of the adverse effects of high local inflation and weaker local currencies, along with pricing associated with the company's new products. As shown in the memo, pre-tax result were $285 million lower than third quarter primarily explained by unfavorable volume and mix, higher cost and unfavorable exchange, higher net pricing with a partial offsets. Let’s turn now to Europe beginning on Slide 17. In the fourth quarter, we continue to implement our transformation plan for Europe. Europe’s fourth quarter wholesale volume was down 3% from a year ago, but revenue improved 10%. The volume decrease is more than explained by unfavorable changes in dealer stocks and lower volume in markets outside the 19 markets in Europe that we tracked. Europe’s higher revenue mainly reflects favorable mix. Europe’s operating margin was negative 8% and the pre-tax loss was $571 million, both improved from last year. As shown in the memo below the chart, Europe’s full year wholesale volume and revenue were up less than 1% and 5% respectively from a year ago. Operating margin was negative 5.8% and the pre-tax loss was $1.6 million, both improved from a year ago despite higher restructuring costs of about $400 million, lower industry volume and unfavorable exchange. Slide 18 shows the factors that contributed to the $161 million improvement in Europe’s fourth quarter pretax results from a year ago. The improvement is explained by favorable market factors and several favorable items and other including higher parts and services profit, offset partially by unfavorable exchange and higher cost. As shown in the memo below the chart, pretax results declined $343 million compared with third quarter. This is more than explained by unfavorable onetime factors, a seasonal increase in cost as well as a seasonal reduction in parts and services profit, higher product and warranty cost and higher restructuring costs. Europe market share trends are shown on Slide 19. In the fourth quarter, total market share was unchanged from a year ago. The retail share of the retail passenger car industry improved. Both share metrics deteriorated compared with third quarter reflecting primarily a seasonal decrease in the U.K. industry. Starting with the left chart, our total fourth quarter market share for the Europe 19 markets was 7.5% unchanged from a year ago. Full year market share is 7.8%, was now a one tenth of a percentage point mainly reflecting low availability of Mondeo, S-MAX and Galaxy in the first quarter. As shown in the right chart, our passenger car share of the retail segment of the five major European markets was 7.5% in the fourth quarter, up seven tenths of a percentage point from the same period last year. This retail improvement was underpinned by solid performance of Fiesta, C-MAX and Kuga. Full year market share at 8.2% was up one percentage point. Although not shown, our commercial vehicle market share for the full year at 9.2% was up seven tenth of a percentage point compared with the prior year and our highest share since 2007. In 2013, Ford was the fastest growing commercial vehicle brand and transit nameplate was the leader in the commercial van segment. Let’s now review Asia Pacific and Africa in Slide 20. Our strategy in Asia Pacific and Africa continues to each grow aggressively with an expanding portfolio of global One Ford products with manufacturing hubs in China, India and ASEAN. As shown on the left, fourth quarter wholesale volume was up 29% and net revenue which excludes our China JVs grew 16%. Our China wholesale volume not shown was up 45% in the quarter and about 50% for the full year. The higher volume in the region reflects mainly improved market share. Higher industry volume increasing from a SAAR of 33.1 million units to 38.1 million units and favorable changes in dealer stocks also contributed. Our fourth quarter market share was 3.9%, half a percentage point higher than a year ago and a quarterly record. The improvement was driven by China where our market share improved half a percentage point to a record 4.4%, reflecting mainly strong sales of Ecosport and Kuga. Asia Pacific Africa's higher revenue primarily reflects favorable volume and mix. Operating margins was 3.3% and pre-tax profit was $106 million, both higher than a year ago. This was the region’s sixth consecutive quarterly profit and a fourth quarter record. As shown in the memo below the chart, Asia Pacific Africa’s full year wholesale volume and revenue improved 30% and 17% respectively compared with a year ago. Operating margin was 3.5% and pre-tax profit was $415 million both substantially improved from last year’s results. The $67 million year-over-year improvement in Asia Pacific Africa’s fourth quarter pre-tax profit is explained on Slide 21. Market factors were favorable as was other mainly reflecting higher royalties from our joint ventures and an insurance recovery. Higher cost as we continue to invest for future growth were partial offset. As shown in the memo, Asia Pacific Africa pre-tax profit was $20 million lower than third quarter more than explained by higher cost. Our favorable market factors were partial offsets. Turning now to Ford Credit, Slide 22 shows the $46 million decrease in fourth quarter pre-tax profit compared with year ago. The decrease primarily reflects unfavorable residual performance related to lower auction values and lower financing margin, both in North America as well as credit loss reserve changes. Higher volume was a partial offset. Ford Credit higher volume primarily in North America, was driven by in increase in leasing, reflecting changes in Ford's marketing program as well as higher non-consumer finance receivables due to higher dealer stocks. As shown in the memo, Ford Credit’s pretax profit was $59 million lower than third quarter. Slide 23 provides an explanation of the change in Ford Credit’s full year profit compared with 2012. The improvement of $59 million is more than explained by higher volume, primarily in North America, driven by an increase in leasing reflecting changes in Ford's marketing programs, as well as higher non-consumer finance receivables due to higher dealer stocks. Partial offsets were higher credit losses due to lower credit loss reserve reductions in all geographic segments and unfavorable residual performance related to lower than expected auction values in North America. Next on Slide 24 is our automotive growth cash and operating related cash flow. Automotive growth cash at the end of the quarter was $24.8 billion, a decrease of $1.3 billion from the end of the third quarter. Automotive operating related cash flow was $500 million, more than explained by automotive profit. During the quarter, we contributed $1.1 billion to our global funded pension plans, which included about $700 million of discretionary payments to our funded plans as part of our pension de-risking strategy. Dividends paid in the quarter totaled about $400 million and we concluded our compensation related share repurchase program for 2013. Full year automotive operating related cash flow was a record $6.1 billion and gross cash improved $0.5 billion. Slide 25 shows the automotive debt at the end of the quarter was $15.7 billion, which is a $100 million lower than third quarter. We entered the year with net cash of $9.1 billion, $900 million lower than a year ago and automotive liquidity of $36.2 billion, $1.7 billion higher than a year ago. Slide 26 provides our annual update on global pension plans. Worldwide pension expense in 2013, excluding special items was $1.6 billion, $400 million higher than 2012. Special item charges were about $800 million, including about $600 million associated with U.S salaried retiree voluntary lump sum payout program which had now concluded. In 2013, we made $5 billion in cash contributions to our worldwide funded pension plans, up $1.6 billion compared with year ago. In 2014, cash contributions to our funded plans are expected to be $1.5 billion globally, most of which is mandatory. This is $3.5 billion lower than last year reflecting our improved funding status. Worldwide, our pension plans were underfunded by $9 billion at year end 2013, about $6 million of which is associated with our unfunded plans. In total, this represents an improvement of nearly $10 billion compared with the year ago driven primarily by higher discount rates and our cash contributions. Consistent with our de-risking strategy, we continue to increase a mix of fixed income assets with the objective of reducing funded status volatility. The fixed income mix in our U.S. plants at year end 2013 was 70%, up from 55% at year-end 2012. Asset returns in 2013 for U.S. plants was 3.7% reflecting strong growth asset returns offset partially by fixed income losses as interest rates rose. For 2014, our expected long term return assumption for the U.S. is 6.89% down about 50 basis points from a year ago reflecting higher fixed income allocations. Slide 27, summarizes our 2013 results of our planning assumptions and key metrics compared with the plan we shared at the beginning of the year. Overall we delivered strong results in 2013 meeting or fitting all operational and financial metrics with the exception of quality. Despite a challenging environment particularly in Europe and South America, we achieved total company pre-tax profit of $8.6 billion, one of the best full year results in our history. In Europe, we continue to implement our restructuring plan as we remain on track to return our business profitability in 2015. And in Asia Pacific, Africa, there are multiple proof points of the success of our growth strategy, record volume, revenue, market share and pretax operating profits. And we’re continuing to invest heavily in the region to support even more growth, profitable growth in the years ahead. Importantly, we also generated record positive operating related cash flow. So again, 2013 was an outstanding year for Ford. With that let’s turn it back to Allan who’ll take us through 2014 outlook. Alan?

Thank you, Bob. Slide 28 summarizes our view of the business environment for 2014. We project global economic growth to be in the 2.5% to 3% range and global industry sales to be in the 85 million to 90 million unit ranges. U.S. economic growth is projected to be in the 2.5% to 3% range with the industry sales supported our continued improvement in the housing sector and replacement demand as a result of the older areas of the vehicles on the road. Policy uncertainty now has reduced with the federal budget agreement and the Federal Reserve policy announcement in December. In South America, Brazil’s economy is relatively weak with the low trend growth, while in Argentina and Venezuela there are escalating risk as both the economies are weak with unclear economic policy direction. In Europe, on the other hand, economic indicators are stabilizing. For 2014, we expect GDP growth of 1% in the Euro area and 2% in the UK. The European Central Bank goes passed the interest rate to quarter 0.25% in November and has indicated it will keep rates low for an extended period. The Bank of England also has indicated it will keep rates low until the unemployment rate has declined. In Asia Pacific and Africa, stable economic growth is expected this year. In China as it cherries out the structure reform transitions to a consumption lead economy. Growth in India is expected to improve modestly as the country moves beyond election uncertainty and a new government assures in more pro-growth economic policy. Overall, despite challenges, we expect global economic growth to continue in 2014. Slide 29, summarizes our 2014 outlook for our automotive sector and Ford Credit. First, we expect North America to be strongly profitable, but at a lower level than 2013 with an operating margin ranging from 8% to 9%. This outlook reflects the impact of launching sixteen all new or significantly refreshed products. As a result, we expect production downtime for model changeovers to result in lower wholesale volume than in 2013. With regard to the all-new F-150, we’re scheduling this year 11 weeks on production downtime including the summer shut down here at our Dearborn plant and two weeks including the summer shutdown at our Kansas City plant. We will provide additional information later this year about next year’s Kansas City launch. In North America, we also expect net pricing in 2014 to be slightly unfavorable, as we run out outgoing models and assume a continuation of a more competitive pricing environment for small and medium cars and utilities due to the weaker yen. We also expect higher manufacturing, engineering and spending related costs to support our launches as well as for the products and capacity actions that will be launched in later periods. And finally, North America will not benefit this year from dealer stock increases as it did in 2013. In South America, results are expected to be about equal to 2013, or about breakeven. This outlook reflects improved profitability in Brazil and Argentina, offset by deterioration in Venezuela, including very low levels of production and our planning assumption that a major devaluation with a $350 million profit effect will occur in the first quarter. There are risks to this outlook, however, given the volatility of the situation in Venezuela and increasing risks in Argentina, where devaluation of the peso is accelerating and the government recently issued controls on vehicle imports. In Europe, we expect reduced losses, including restructuring costs of about $400 million that will be reported in 2014 operating results. The European transformation plan continues to progress well and as mentioned earlier, Europe remains on track to achieve profitability in 2015. Our new Middle East and Africa business unit is expected to approach breakeven results in 2014. In Asia Pacific, pre-tax profit is expected to be about the same as in 2013, reflecting continued investments to support growth in 2014 and beyond, a slower rate of revenue and volume growth than a year ago due to production constraints, a more competitive pricing environment, and finally, unfavorable results in Australia as we restructured the business and reflect the effects of a weakening Australian dollar. Automotive net interest expense is expected to be about the same as 2013. And finally, Ford Credit expects pre-tax profit to be about equal to 2013. Profit from growth and receivables should offset continued normalization of credit losses, the continued run off of higher-yielding assets and the impact of Ford Credit's strategy to increases percentage of unsecured debt as we continue to build a stronger investment-grade company. Ford Credit also expects managed receivables at year-end of about $110 billion, managed leverage to continue in the range of 8:1 to 9:1 and distributions to its parent of about $250 million. Now let’s look at what this means for the total company on Slide 30 please. For 2014, we project U.S. industry volume, including medium heavy trucks to range from 16 million to 17 million units. In Europe, we expect the range of 13.5 million to 14.5 million units. And in China, we expect volume to range from 22.5 million to 24.5 million units. For our financial metrics, which are now aligned to the key drivers of total shareholder return, we expect automotive revenue to be about the same as 2013. Automotive operating margin to be lower, automotive operating related cash flow to be positive but substantially lower than 2013, including higher capital spending consistent with our mid-decade outlook of about $7.5 million. Pre-tax profit for Ford Credit is to be about the same as last year and company pre-tax profit, excluding special items, to range from $7 billion to $8 billion. In 2014, we continue to invest to create innovative products such as the all-new F-150 to ensure Ford has the freshest and most attractive product lineup in the industry. At the same time, we are investing to expand our portfolio into new markets, as well as adding capacity, where appropriate, to satisfy increasing demand. As a result, this year will be a solid year for the company and a critical step forward in implementing our One Ford plan to continue delivering profitable growth for all. Turning to Slide 31, in closing, our One Ford plan is built on a compelling vision, a comprehensive strategy, and relentless limitation. As results we announced today, we made clear, our One Ford plan continues to deliver profitable growth around the world and we are absolutely focused on building great products, creating a strong business and contributing to a better world. 2013 was an outstanding year for Ford, the fourth year in a row, including continued strong results from North America, breakeven results in South America, as we work to adjust to an uncertain environment in the region. Continued successful execution of our transformational plan for Europe as we work to return the profitability in 2015, continued strong road and record profitability in Asia Pacific and Africa, consistent performance from our Ford Credit operation which continues to deliver world class customer service and solid bottom line results and record breaking operating related cash flow which enabled us to continue to our pension derisking strategy resulting in a reduction of more than 50% of our global unfunded status. Now we’d be pleased 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 and then take questions from the media. Now in order to allow for as many participants as possible within this timeframe, please keep your questions brief and please avoid asking more than two. Julie, can we have the first question please?

You can indeed. And the first question from the line of Adam Jonas from Morgan Stanley. Please go ahead. Adam Jonas - Morgan Stanley: Thank you very much indeed, just a few questions. First could you take this opportunity to describe how the F-150 truck change over, given the 11 weeks of production downturn that you highlighted in the prepared remarks, how that can impact North American results this year by quarter even qualitatively? Any extra guide qualitatively could be very helpful given the potential for significant disruption quarter to quarter.

Sure, Adam. Okay Adam, it's 13 weeks in total. It’s 11 at Dearborn and two at Kansas City. And I think it's first of all, stepping back. But I think it’s fair to say that when you look at the decline year-over-year that we’re expecting in North America’s results, it’s largely attributable to the F-Series. And that’s probably about all we’re going to say in terms of the financial affect of F-Series. In terms of [counterization], I’m going to answer that somewhat differently because we didn’t provide any specific commentary today on [counterization]. I was expecting that you guys would ask about that. I think it could atypical year and I think it’s because of the product launches. It's also because of the uncertainties around particularly South America from the emerging economies and the effect that they could have on us quarter-by-quarter because we said in New York and similar internal assumptions, we’re assuming some sort of evaluation that will be able to reflect in Venezuela. But given the recent announcement from general government, they are not clear exactly how that would happen if they set up this two-tier network and how we’d be able to capture that more accurate value of the currency and let that flow through to a devaluation. So I think it's going to be an atypical year and what I plan to do is as we go through these quarter and we kind of see where you guys are if we think we need to kind of nudge it one way or the other we'll try to find an opportunity to do that in the course of that quarter. Adam Jonas - Morgan Stanley: Thanks Bob. Yeah, that would be very helpful given the potential disruption and of course to get the investors to kind of more think about 2015 and get some comfort this year, thanks. And just the second question then; on the Turkish Lira and the economy, can you guys remind us on your open position in Turkey. Are you net long or net short Lira given the export of transit and if so it maybe more simply, if the Lira were to weaken substantially or stay weak, does that help your exports more than it hurts your local sales in terms of translation of profits? Thanks.

Well, some of that depends on the degree to which we can price in Turkey for that. But I think what it probably means is that it will hurt the profitability of the Ford Otosan joint venture, but could have benefits or at least more balance if you want to cross Ford because so much of what they build in Turkey is exported back into Ford Europe. Adam Jonas - Morgan Stanley: So you're not highlighting any particular direction. One way or the other would you say it’s kind of balanced over all, the impact on the company?

I think maybe slightly negative. We actually had some negative effects within the year-over-year performance in Europe related to the Turkish Lira. Adam Jonas - Morgan Stanley: Great, thanks very much.

Thanks Adam.

Thank you for that. (Operator Instructions) The next question comes from the line of Brian Johnson from Barclays. Please go ahead sir. Brian Johnson - Barclays: Talking about capacity actions and some of the cost of those both in our ‘14, for later years, wondering a couple of things. One just strategically given that we seem to be in era of cheap oil given the U.S. domestic production, ageing demographics and given that your planned capacity utilization seems to be running better in trucks, SUVs and in cars. Are you thinking about cars any differently, the balance between cars, SUVs and truck any differently than you might have been say three or four years ago. And secondly, are any of these capacity actions to have SUV capacity or to make more of your factories flexible between the SUV and car variance of your platforms? Thanks.

You bet, Brian, Mark will take a lead on that.

Well, I think, fundamentally as you know, as you see in the past, we view the price of fuel overtime to rise, that’s why we’ve been so focused on fuel economy as a reason to buy for Ford. So I think we have not changed our view on that. I think, we’re well positioned from a capacity standpoint. As you know, we’ve been designing our manufacturing plans to be very flexible. And also as the same time as we mentioned before, we now with our global One Ford products, we also have more flexibility on where that production comes from, depending upon the region. So I think we’re comfortable with our assumptions right now and we have the flexibility if we see changes. Brian Johnson - Barclays: So what are the capacity actions here contemplating?

Well, as we said from our capacity standpoint here in North America, we have six facilities that will have some capacity actions this year. Globally, as we mention we’re opening three plants this year, two in China, one in Brazil and that’s part of overall in Asia Pacific or 10 plants we’ve been building which we’ve opened four so far and six to go. So as we grow the business, we think that we’re making sure we have the appropriate amount of capacity and flexibility to use the assets to the greatest extent. Brian Johnson - Barclays: So are you going to make more plants in North America flexible, let’s say focus estate?

Well, I think, majority of our plants are flexible here in the U.S. We’ll talk about -- we won’t get into additional details of what we’re doing but clearly our whole approach of being able to match production to demand and do that flexibility as you see in a number of plants, we’ll continue to walk on that path. Brian Johnson - Barclays: Okay. Thanks.

Thanks Brian.

Thank you for your question. The next question comes from the line of Joe Spak from RBC Capital Market. Please go ahead.

Good morning everyone. Thanks for taking my question. Just you guys have talked a lot in the past about the ongoing negative mix shift in North America and if we just reviewing the year that totaled about $1 billion this year during which where trucks significantly outpaced cargo. So I’m just trying to get a sense from you guys. Are we through the largest part of this year-over-year decline this year or does it actually get worst from 2013 looking ahead? RBC Capital Market: Good morning everyone. Thanks for taking my question. Just you guys have talked a lot in the past about the ongoing negative mix shift in North America and if we just reviewing the year that totaled about $1 billion this year during which where trucks significantly outpaced cargo. So I’m just trying to get a sense from you guys. Are we through the largest part of this year-over-year decline this year or does it actually get worst from 2013 looking ahead?

This is Bob. How are you today?

Good. RBC Capital Market: Good.

Good. Yeah. We did have a negative effect. Year-over-year, it wasn’t as large as you indicate. I’m just checking my factory here. We’re looking on a year-over-year basis of about eight-tenths and only about six-tenths of that was mixed among vehicles which is what you're talking about.

Okay. RBC Capital Market: Okay.

And that was largely the fact that we had such great success with our super segment vehicles. S-series were less as a percent of the total. It actually grew it share of the segment and in the growing segment, so it's a big positive for us. So I think as we talk about this before, Joe, I think it’s a positive. We’re focused in a one element of change which is mixed but its more growth in total. And so while the margins of those vehicles are as great as they are in the larger vehicles, it’s more in total in terms of revenue and profitability and certainly helping our returns. And that is our plan going forward in terms of extending our portfolio and particularly focusing on all segments, not just trucks as we did historically.

Stuart, would you classify where we are on that path along the shift as through the larger part of the steeper decline? RBC Capital Market: Stuart, would you classify where we are on that path along the shift as through the larger part of the steeper decline?

I wouldn’t expect to see that type of the set in 2014. But we’ll have to wait and see in terms of what happens after that.

Okay. And then just maybe point of clarification for me on the outlook. When you are talking about Asia Pacific about equal, is that what the actual printed results or I’m assuming eventually we’re going to get some sort of split up between with the Middle East and Africa being separated out. So maybe you could just pull out a little bit of clarification there? RBC Capital Market: Okay. And then just maybe point of clarification for me on the outlook. When you are talking about Asia Pacific about equal, is that what the actual printed results or I’m assuming eventually we’re going to get some sort of split up between with the Middle East and Africa being separated out. So maybe you could just pull out a little bit of clarification there?

Yeah, that’s with or without Middle East broken out; we probably would have given the same guidance.

Okay. RBC Capital Market: Okay.

And what we’re planning that we’re going to have a Ford University event later in the quarter and one of the things that we’ll do and I think we’re going to do this in the 10-Q as well as to provide some insights in terms of, what the impact of that changes on the affected business units.

Okay, thank you. RBC Capital Market: Okay, thank you.

Thank you.

Thank you for your question. The next question comes from the line of Matthew Stover from Guggenheim. Please go ahead. Matthew Stover - Guggenheim: (Inaudible)

We can't hear you, Matt?

We'll go on to the next question, Operator.

:

Matt are you there?

Why don’t we move to another analyst?

We have now John Murphy from Bank of America. John Murphy - Bank of America Merrill Lynch: Good morning guys, can you hear me?

You bet John, loud and clear. John Murphy - Bank of America Merrill Lynch: First question; as we moved in the declining in margin in North America from 2013 to 2014, you highlighted the F-150 as the major reason for the -- you had a change over there, it’s the major reason for the decline. As we get into ‘15 and ‘16, are there any other structural factors you think are going on in the market or in the business that shouldn’t allow you to get back to that 10% margin range we’ve seen for the last two years?

Well, we still think that the target of 8% to 10% that we’ve talked about is appropriate. I think as we go forward, yeah, we just had the question from Joe I think, we’ll see pressure from a higher mix of smaller vehicles and we talked about that before. The pressure from increasing cost to meet regulatory requirements and the extent to which we can price or not to recover those as well. And then as you recall in the discussion that we had in New York in December, we’re building into ’14, we wanted to see how long does it last, but we're building in a proper pricing environment because of the benefits that Japanese manufacturers have from a weaker Yen. That can change over time, but we kind of built that in going forward as well. So we’re still comfortable with 8% to 10%, but those are types of examples of factors that, sometimes we have quarter that's well over something like that, we all get excited and think that we’re on a some new step level of performance in North America. It’s these types of factors that we think are going to keep us in that 8% to 10% range. John Murphy - Bank of America Merrill Lynch: 12% is a good number in a quarter. You get excited about even if it's just for a quarter.

I would love to have that for and we agree. John Murphy - Bank of America Merrill Lynch: Second question on the U.S. pension plan; I mean, given that you’re now probably 5% underfunded or maybe even a little bit less than that and the trajectory of rates should be reasonably good for that funded status going forward. Do you think there is the potential to free this plan or potentially cut a deal with the UAW similar to what you did in 2007 with your Health Care Trust? It just seems like you're getting to a point where you have other parties that might be interested in taking this on and sort of taking it out of the company and really eliminating their risk in the equation. Just seems like, given that the funding status has improved so much, you might have some options on the table. Have you had those discussions or have you thought about potential structural solutions here now that you’re getting closer to fully funded?

No, we can comment on discussions that we may or may not be having with UAW on this. That would be private between us. It’s true that -- we’re finally -- the light isn’t at the end of the tunnel in terms of the funded status and all of our global funded plans and we expect to get there by this decade. One thing I would say is John is that our objective is to get to a funding status on an economic basis, not just on a U.S. GAAP basis. So we have to go a little bit beyond in terms of what you’d see from these data which are U.S. GAAP. But we’re close. I think what it really means is that we don’t have to contribute as much over the next two or three years and we talked about that in December and now maybe about a billion to two a year, maybe at the low end of that range to get the fund status. And then, of course, there are options, because once it’s fully funded, you can think about some of the things that you’ve talked about. There is always a premium involved in that. I don’t know if that would make sense with one investor or cash and outlay, but it’s certainly an option that we don’t have any plans to do that at this time. John Murphy - Bank of America Merrill Lynch: Okay. And if I could just sneak in one follow-up question on the F-150, traditionally when you go through a changeover that is large, there is a period, a quarter or maybe even few where there is an inventory buffer that’s builds ahead of the changeover and then there is also some pricing actions ultimately to clear out that inventory. Do you think that you are going to manage this launch differently than that sort of historical pattern where you actually might be in period where the inventory is really incredibly light or will you build this buffer? I’m just trying to understand this because it is -- if it’s a big issue because if you don’t build that buffer, the industry can be wildly short of pickup trucks and pricing of pickup trucks should be very strong this year. So just really trying to understand if you are going to build that inventory buffer or not?

Well, I think, overall, John, it’s a good question. As you know, we have a lot of experience with this going back to the current generation of our F-150 which we did about four, five years ago and then the new generation five years before that where we have staggered launches. So I think what you are going to expect from us is we have assumptions obviously around the industry and around segmentation. So I think we are well-positioned from a stock standpoint to support dealers throughout the year. You may see some months where it might be a bit elevated depending upon the sales rate but we are manufacturing out our accessories of production this year and we feel comfortable with our assumptions.

Move on to the next question please.

The next question comes from the line of Ryan Brinkman from J.P. Morgan. Please go ahead, sir. Ryan Brinkman - J.P. Morgan: Hi. Good morning. Thanks for taking my question.

You bet, Ryan. Ryan Brinkman - J.P. Morgan: You touched on Argentina, obviously, it’s still an evolving situation. But could you perhaps help us a bit more in the potential near-term negative impact, perhaps by relying maybe how much cash is in that country relative to, a place like Venezuela? And then, I am curious, if you see any potential longer term benefit, given that you export a lot of vehicles, I think, the folks from range from there to Brazil and other places too?

Ryan, your question actually highlights why we look at South America and what’s going on now on it, just trying discuss exactly what’s going to happen, because all those things are in play and it depends to the extend in which we comprise, it depends to the extend, the government could take other actions as they did in Venezuela. We have been able to get cash out of Argentina away, we don’t have the same type of exposure that, that we face in Venezuela, where we have been unable to get the cash out. We still have about $700 million of cash sitting in Venezuela, whereas in the case of Argentina cash at minimal impact our local balance sheet relative balanced. So don’t take that issue. There is also positive, I mean, the thing is interesting as Argentineans trying to store value and something that’s more durable has actually created maybe a bit of the bubble in the overall industry, pricing has been good there recently and because people want to purchase their currency or their value and something car like a vehicle, so it’s actually been a positive. But, overall, clearly, now what we are seeing is much, much higher labor inflation, much, much higher level of devaluation, we will have to see how the government chooses to respond to that in term of any constraints they put on since we try to manage the business. Longer term, we could make Argentina more competitive and as you point out we do export from there, so that would be a positive. But we just have to wait and see how all that mixes out with the time it is. I think you have highlighted something, I wanted to underscore today, which is to repeat maybe with a bit more emphasis than what I even said in December, which is we have got an outlook for South America about the same as what we saw last year, but I would just underscore again the level of risk that we are going to have to manage particularly over the next few months in Argentina and Venezuela. We expect to see how that all sorts out. I would remain you we have been in Argentina 100 years, so we have been through this before, but it takes a lot of work, we have got folks no matter even that type of environment. Ryan Brinkman - J.P. Morgan: Okay. Very helpful and interesting. Then just second and last question, I understand that you just increase your dividend sizably, but also that $36 billion in liquidity your $6 billion over your target with a lot of your outside pension contributions now behind you. So how should we think about the timeline of progressing toward your $30 billion target? Thank you.

Yeah. We will go back to what we have talked about in August as the conference relate on our cap strategy. We still have ahead of us about $6 billion reduction in automotive debt, so if you remember we talked about getting down to about 10 and we’re 15 -- 157 I think at the end of last year, so that's got to be handled. Going back to the earlier answer on pensions, we still have $1billion to $2 billion a year over the next two or three years, can manage there. We also -- I'll remind you we’ve got the -- one of the large convertibles that needs to be taken care towards the end of this year that we worked about a $1.6 billion or so depends on the stock price to take care of that if we were to use cash as opposed to stock and so that option is on the table. So I think if you take all those together, you’re going to find us getting down to $36 billion and cash $20 billion to $21 billion. Ryan Brinkman - J.P. Morgan: Great, thanks.

Thank you for your question. The next question comes from the line Rod Lache from Deutsche Bank. Please go ahead sir. Rod Lache - Deutsche Bank: Good morning, everybody.

Hey Rod. Rod Lache - Deutsche Bank: You mentioned earlier and said this maybe a week or two ago that you’re looking to expand capacity at six plants in North America. Can you clarify is F-150 among the products that you’re looking to build capacity for you basically holding at the three shifts capacity at two plants?

Mark?

Yeah. Rod. We'll just reiterate on the F-150. As you know we had a third crew on Kansas City last year. So that is not one of the plants. There were weak in their capacity, we have sufficient amount of capacity at the F-Series plants. It’s really some of our other plants and some of it is adding capacity, some of it is changing line rates and those type of things. Rod Lache - Deutsche Bank: Okay. So if you were thinking about the drivers of North American earnings beyond 2014, obviously the thirteen weeks of downtime for F-Series doesn’t recur an opportunity for truck volume beyond that or you basically kept out and is there an opportunity to improve contribution margins or is that something that you would think as more difficult given the regulatory requirements?

I think -- this is Bob. I think we’ll see -- our expectations are that we’ll see industry growth. We’re still making investments in products that could include expansion in the portfolio, we'll have to wait and see. And we’re working to strengthen the brand and to make sure that we can get more out of every unit that we sell in terms of revenue. So I think -- and of course F series getting a back up to speed after the changeover to the all-new F-150, obviously will put that back on track. So I think it just -- it’s growth across the entire portfolio supported by a growing industry. Rod Lache - Deutsche Bank: Okay. And just lastly, structural costs grows quite a bit in 2013 and historically you’ve given us some feeling for magnitude and regional increases and structural cost. Do you have any thoughts you can pass along for 2014?

Yeah, I think we’ll see another year of increase in structural cost as we continue to grow across the world. It just will be quite to a level that we saw in 2013. Rod Lache - Deutsche Bank: Okay. All right, thank you.

Thanks, Rod.

Thank you for your question. The next question comes from the line of George Galliers from the ISI Group. Please go ahead sir. George Galliers - ISI Group: Yeah, good morning and thanks for taking my question. I had two questions on Europe, firstly, you’re making big strides in retail share, but commented that the course was weaker sequentially dude to a seasonal slowdown in the UK. How much of your retail share gain is down you exposure to the UK, which is clearly been outperforming and therefore not structural and how -- what do you see as a sustainable level of retail share going forward?

Yeah, I don’t know the answer right off the top of my head. As you know, we have a higher share in the UK than we do on average across Europe. So certainly the fact that the UK industry has outperformed the rest of Europe has benefited us. But, I don’t think that’s a major part of the share increase at all, it’s largely due to the retail focus that we’ve had in Europe and across a number of different vehicles including Fiesta Kuga, we’ve got Eureka Ford sport coming in and so forth. So I think it’s largely around the focus of the team, the new products that we’re rolling out, 40% to 45% of the lineup was new this year in terms of what we told. So I think that’s a bigger driver than the effects of the UK although that actually didn't help us.

I would just also add on the second part of your question on growing our retail shares going forward. It’s all based obviously on getting great product to customers and you’ve heard in the past our 25 vehicles that we’ve been launching in the last five years. So we launched 11 last year, we are going to launch 12 this year. So that gives you a little indication of the product part of the plan and how we are supporting new products to the marketplace. A little over 40% of the sales in cost lining Europe in 2013 was from new products or significantly refreshed products. And when you look at our order banks, December year-over-year it’s up about slightly less than 30%. So we feel as long as we can continue to deliver these great products to customers, we are very encouraged by the response from them. And importantly our dealers are feeling more encouraged. They improved their profitability last year and also importantly they have stepped up and over 2,500 dealers have agreed to upgrade their facilities over the next year or two. So they are also very encouraged in anticipation of the growth. And finally from a brand standpoint, getting back to our Europe transformation plan around product brand and costs. On the brand front, the brand is getting stronger based on the metrics that we see. Pricing is improving versus the competitors. And as you know, we’ve gotten our stocks in line, particularly along the lines of self-funded stocks which are down significantly resulting in our brand. George Galliers - ISI Group: Excellent. That all sounds very positive. Actually just sort of accelerating on from start, my second question was could you provide some color on your European forecast where you have production down slightly year-on-year in Q1? It just seems a bit conservative to me given stock today is around 5% higher than Q1 last year and as you mentioned your stock levels are down considerably based year-on-year and sequentially.

Well, right now when you look at our stock levels, they are broadly in line with our plan. Obviously it’s part of our process. We look at the sellers, both across Europe and within each country on a monthly basis when we make appropriate production changes. So we will stick exactly to our plan of matching production to demand and as we see the industry, potentially as it picks up we will produce more and if now or just our stocks accordingly. Can we have the next question, please?

Yeah. The next question comes from the line of Itay Michaeli from Citigroup. Please go ahead. Itay Michaeli - Citigroup: Great. Thanks. Good morning.

Good morning. Itay Michaeli - Citigroup: Bob, just a point of clarification, with the improvement in the pension in 2013, can you provide any outlook for pension expense in 2014, any thoughts with North America and international if you have it?

As you saw on the slide 26, the pension expense was $1.6 billion. We expect that to be lower in 2014, reflecting the improved tonnage status. Itay Michaeli - Citigroup: Okay. And expect to be more in North America given the contributions, or would that improvement be a bit more broad based geographically?

Mainly, North America and Europe. Itay Michaeli - Citigroup: Okay. Perfect. And then just the second question, hopefully we could do a bit more of a big bucket walk into the profit outlook for Europe in 2014. I know you’ve had some slight market growth assumption. I think there is maybe a $50 million tailwind from lower restructuring. Any other big buckets in terms of what you are expecting, or are you kind of modeling in for pricing and maybe, other cost buckets we should think about for Europe in 2014?

Just very broadly, I mean, the way that I would think about Europe and I would put into any dimension the actual improvement that we are looking at, at least not at this point in time. But we are going to see positive market factors in Europe in 2014. And we would expect that to be both and sort of more on the mix and I think we will do better on net pricing. Going to back to Mark’s comments around all the new products as well as the fact that the markets seems to be slightly turning, which is going to help a bit. We don’t expect to see too much change in total one cost and so one of that will just flow through. Itay Michaeli - Citigroup: That’s helpful. Thank you.

Thank you for your question. (Operator Instructions) We are now switching to media. (Operator Instructions) First question comes from the line of Craig Trudell from Bloomberg News. Please go ahead, sir. Craig Trudell - Bloomberg News: Hi, good morning. I have a question related to the guidance for pricing for North America and the comments about the Yen. Ford has been pressuring the government to include some provisions related to currency issues in the TPP trade deal. I wonder to what extent you can talk about just how respective you’re sort of feeling -- how receptive the regulators are about to that as they work on this deal?

Craig, this is Alan. We’re very positive with the response and discussions that are taking place, which is clearly the awareness of the global interdependencies and the importance of global rule based trading is really, really becoming clear to everybody. So, currency discipline and having the markets set the currency rates is going to be very well understood and the importance of it. So we are very pleased about the dialogue that is going on now, as you pointed out with TPP.

Great, thank you.

You’re welcome.

Thank you for your question. The next question comes from the line of Alisa Priddle from Detroit Free Press. Please go ahead. Alisa Priddle - Detroit Free Press: Good morning, gentlemen. Can you hear me?

We can Alisa, it sounds good. Alisa Priddle - Detroit Free Press: Excellent. I just wanted to ask, you were saying that basically all of your metrics were met except for quality. I don’t know if you’re able to quantify sort of how far off you are and more importantly how you would -- are addressing up for 2014 and now you think this year will be better on that front?

Hi Alisa, it’s Mark. When you look at our quality performances, as we mentioned the three big areas where we’ve talked about before in North America around MyFord Touch and transmissions and [some security items], we’ve made a lot of progress, interestingly enough, significant progress on MyFord Touch. At the same time, we’ve seen a much higher take rate of MyFord Touch. So that has tempered our improvement that we’ve seen there. I can tell you that we’re all intensely focused on continuing to improve our quality, not only hear in the U.S. of course during the year, we have a lot of launches, but when you look in South America we had some issues at the end of 2012. We think we’re through that. We’ve had very good performance in Europe as well as Asia Pacific. So we’re just going to stay intensely focused on that and keep listening to our customers and improving our quality. We’re absolutely committed to that. Alisa Priddle - Detroit Free Press: Because it’s -- with the focus that has been coming down from the top for a number of years and as you say this is going to be an even tougher year. So I don’t know -- just try to figure out what changes to tackle it?

I think (inaudible) -- as we mentioned consistent commitment to this. Joe Hendrix and the North American team are very focused on this particularly around the launches as well as the implants controllable. We’re very confident, we’re working on the right items and we’ll continue to do that going forward.

The next question comes from the line of Karl Henkel from The Detroit News. Please go ahead sir. Seems to be some interference on the caller’s line. Karl, are you there? Karl Henkel - The Detroit News: I am, yes.

Please go ahead, sir. Karl Henkel - The Detroit News: Sorry about that. The pie chart that normally is on Slide 1 of your presentations and the breakdown between Americas, Europe and Asia Pacific and Africa, I’m just wondering with the Middle East and Africa breakout now, how we should kind of view that break down moving forward. And then the second question is, we brought in the F-Series and more on the powertrain side. I know you’re adding the new EcoBoost engine for the lineup, but I haven’t quite heard, are you saying anything about where that incremental production is going to come in at and how you’re going to -- I guess worked at situation during the kind of extended crossover from this generation to the next generation.

Karl, I’ll take the, kind of the first one and Mark can maybe help you out in the F-Series question. I think the way to think about Middle East and Africa and obviously we'll talk more about that as the year progresses. Is this maybe about 70%, 80% the size of South America in terms of the industrial volume? We’ve had about 5%, 5.5% market share. So when you think about where the volume will come from, you’ll see some volume coming from our North America and that was largely going towards Middle East. So we will see some volume coming out of Europe because that volume largely was going into North Africa and into Israel, and other parts of Middle East and then you’ll see some volume coming out of Asia Pacific Africa and as far as the Ranger, that was exported from both AAT and Thailand and a little bit in South Africa. So that will all collect into what is -- but will be our new business unit in Middle East and Africa. So it was only about, maybe 250,000 units to 20,000 units something of that range and you break it among the three, it’s not going to have a big effect immediately. What we are really targeting is the huge growth opportunity. That region was about 3 billion of customers that represents in the year ahead. If there is (inaudible) income continued to rise.

And, Carl, the second part of your question is part of the [Escape’s] launch capability. We stressed capability, so we have the four new powertrain, like two of all new when you mentioned the 27, our EcoBoost. We have a new V-6, naturally aspirated and of course the 5-liter as well as the 3.5-liter EcoBoost. So from the manufacturing standpoint, we’re not going to discuss the 2.7 today but we will in the future as we get closer to the launch. Karl Henkel - The Detroit News: Thank you.

Thanks, Carl.

Thank you for your question. The next question comes from the line of Mike Ramsey from the Wall Street Journal. Please go ahead, sir. Mike Ramsey - Wall Street Journal: Hi. Good morning everybody. I, mainly just wanted to ask the question and maybe Bob, or anyone who want to take this. In terms of the heavy investment cycle for new products, you have a large meat of the share. If we were to look out over the next couple of years, it’s just your heaviest year for big investments around the world and will it ease up in the next couple years after this, or are you going to stay on this kind of levels investment for a few years out?

Well, what we’ve guided is, with the mid decade about $7.5 billion of CapEx for years and months, we would expect to the years ahead. That will fluctuate little bit around that and as we find more and more growth opportunities, hopefully, I hope we have the chance to invest more into even more growth and that’s actually what happened on June ’11. And June 11, we guided to $6 billion. And as we understood the opportunities of the ONE Ford plan, we just found so many more ways in which we were going to be able to drive the business growth slower and that, results in the increase in spending. But I think $7.5 million plus or minus over the next two to three years is probably about right. Mike Ramsey - Wall Street Journal: In terms of the cash flow growth, I’m curious whether the cash flow situations expected to maybe improve out after this year in terms of positive net cash flow?

Yeah, I would expect that. Mike Ramsey - Wall Street Journal: Okay. Cool. Thanks.

Thanks Mike. That thing is very helpful. Great summary, Mike.

Thank you for your question. The next question comes from the line of Dee-Ann Durbin from Associated Press. Please go ahead. Dee-Ann Durbin - Associated Press: Good morning. Thanks for taking the call. On slide 23, Bob, you talked about unfavorable residual and lower than expected auction values impacting Ford Credit. Can you just explain that a little bit, what was going on there?

Yeah. I’ll give a brief comment and then, Mike Seneski can fill in. When you look at what happened, this is largely -- if you look at the previous slide, it all happened in the fourth quarter. And part of what happened is we had a reduction in auction values, but also what you had -- last year, if you remember we had hurricane Sandy that really devastated northeast. And the northeast is an area of high lease take rates. And so that storm had the affect of creating, if you were a little bubble if you will have auction values. Now the year-over-year basis, we kind of normalized versus that and so on a comparative basis, you're seeing a big decline. I think that explains lot of what Mike supplements.

That’s exactly right, Bob. Overall, the industry for late model used vehicles was down pretty substantially and is because you’ve got a strange comparison. Hurricane Sandy really increased values for those vehicles, not only in the fourth quarter of 2012 but also in the first quarter of 2013. So we don't think this signals any type of bad news trend for our residuals and we will keep a good watch on it going forward. Dee-Ann Durbin - Associated Press: Okay. Thank you. That helps us plan. Thanks a lot.

Thank you for your question. The next question comes from the line of Joann Muller from Forbes. Joann Muller - Forbes: [Ian] asked exactly the question I was going to ask. So thank you very much. That’s all.

We now go back to the investors’ questions. And the first question comes from the line of Emmanuel Rosner from CLSA. Emmanuel Rosner - CLSA: Wanted to ask you a point of clarification on the tax rate in the quarter. Obviously you had a big tax benefit which you excluded from the operating results. But given the operating results, it looks like the tax charge was quite low. I apologize if you (inaudible) already. But could you please explain what happened?

No, on the operating side, we had a benefit from a change in our repatriation plans of distributions from Ford Credit outside the U.S. So we have booked (inaudible) assumption that we would make that repatriation but we didn’t through some restructuring in Europe leaving the cash there. So that enabled us to -- we had to reverse that, if you will, into the fourth quarter. The other thing that happened on the special front, which is about $2.1 billion good news which as you said was not included in the operating, about $1 billion of (inaudible) have to do with investments in our European legal entities which enabled us to increase our deferred tax assets. And then in addition to that, we had about $440 million, good news that was a tail of what we did back in December of 2011. At that time, we released most of our valuation allowances against our U.S. deferred tax assets but not all. The ones we didn’t release were largely related to U.S. state and local income taxes. And (inaudible) concluded that as we look ahead that we’re going to be able to utilize those assets that we have released valuation allowance against that which enable to defer tax assets that show up, if you will, on the balance sheet and flow-through income. So those two explain largely $2.1 billion.

And what I would like to do is answer my own question. So my own question is, why are your results in the fourth quarter in Europe so much worse than the third quarter, as I kept waiting for someone to ask the question. Since you didn’t, I am going to ask it for you. And the answer, as I said, is largely around the fact that -- and this has been (inaudible) couple. We had about $110 million of a number of different one-time [comp clean-up] factors that occurred in the fourth quarter. We had about $50 million to $60 million of favorable tax in the third quarter which I did not highlight, because it’s not material, we normally wouldn’t talk about something that’s small (inaudible) getting caught on a quarter-to-quarter basis, going from favorable to unfavorable. But about 50% of the impact -- and this is about $115 million or so of seasonality, so it’s about 34% of the difference, which is largely a cost but also there is a seasonal effect in Europe in terms of how the profitability of parts and service. So that basically explains most of it and the balance is related to higher restructuring in the fourth quarter versus the third. So I wanted to tell you that because I know that, that’s probably going to be a question that you guys will be coming back and talking to George and John as a team, I just wanted to get it out there publicly so that they could talk with you about that. Emmanuel Rosner - CLSA: All right. Well that was not going to be my second question. But so still very helpful. Just wanted to get back on the North American margin guidance, I understand that you will provide some helpful guidance throughout the year to help us in the right direction. But when I think about the full year number of 8% to 9% margin and the fact that your downtime seems to be more weighted towards the second half, how much below this 8% to 9% can margin be in any given period?

I would not provide any guidance on that. But I would like to maybe share one other thing with you that maybe will help you guys as you’re thinking about the first quarter. One of the things that we’ve noted is that in general you guys are expecting higher wholesales relative to production than what we are seeing. And I just wanted to let you know that we expect to see bigger gap between production and wholesales in North America in the first quarter than what you’re presently expecting on average. And that’s because we’ve got increased export, some of that is a phenomenon of Middle East that I talked about which those units now no longer will be in wholesales for North America at least the ones that they send over and that will be joined us in Middle East and Africa. And we also have normal inventory so far in the year end shutdown. So just wanted to make your guys aware of that as we’re kind of looking at your analysis, which we do. Emmanuel Rosner - CLSA: Right. Thanks for your answer and thanks for your question.

Thank you.

I hope I answered my own question.

Thank you. Okay. With that, we’ll wrap today’s session. I’d like to thank everyone and we’re really glad that you’re able to join us.

Thank you, George. Ladies and gentlemen that concludes your conference call for today. You may now disconnect. Thank you for joining. Have a great day.