We thank you for your patience; your conference call will begin momentarily. I’ll be the conference coordinator for today. At this time, all participants are in a listen only mode. However, we will have a question and answer session towards the end of today’s conference. I would now like to turn the call over to your host for today’s presentation, Mrs. Lillian Excorn, Director of Investor Relations. Please proceed ma’am.

Thank you, Bill, and good morning ladies and gentlemen. Welcome to all of you who are joining us either be phone or by webcast. On behalf of the entire Ford management team I would like to thank you for spending time with us this morning. With me this morning are Alan Mulally, President and Chief Executive Officer, Don Leclair, Chief Financial Officer. Also in the room are Peter Daniel, Senior Vice President and Controller, Neil Schloss, Vice President and Treasurer, Mark Schulz and K. R. Kent, Ford Credit Chief Financial Officer. Before we begin, I would like to review a couple of quick items. A copy of this morning’s earnings release and the slides that we’ll be using today have been posted on Ford’s investor and media website for your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included on our Form 10-Q for the second quarter. Additionally, the financial results presented here are on a GAAP basis and in some cases, on a non-GAAP basis. The Non-GAAP financial measures discussed in this call are reconciled to their GAAP equivalent as part of the appendix to the slide data. Finally, today’s presentation includes some forward-looking statements about our expectations for Ford’s future performance. Actual results could differ materially, adjusted by our comments here. Additional information about the factors that could affect future results and are summarized at the end of the presentation. These risk factors are also detailed in our FCC filings. Included are annual, quarterly, and current reports to the FCC. I will now turn the presentation over to Alan Mulally, Ford’s President and Chief Executive Officer.

Thanks, Lillian, and good morning to everyone. We’ll begin by reviewing the key financial results for the quarter. Don will then take us through even more detail, then I’ll come back and wrap it up before we take your questions. Overall, our plan is working and is showing clear signs of progress. Despite the improved results of the second quarter, however, we have a long way to go. The challenges ahead remain formidable, and we expect the second half to be difficult. As shown at the top of the slide, vehicle sales last quarter were nearly 1.8 million units, down 33,000 from last year. Total company revenue, $44 billion, was up about 6% from a year ago. The increase primarily reflects exchange, mix, and net pricing improvements, partially offset by the lower volume. Profit before tax from continuing operation was $483 million, up $774 million from last year. This includes a $1.1 billion improvement in automotive operating profit by lower profits and financial services. Our second quarter net income was $750 million, including $443 million, of favorable pre-tax, special items. We ended the quarter with $37.4 billion in cash, an increase of more than $2.2 billion since the first quarter. I would like to point out that the net results include about $180 million pre tax improvement related to hedges in Jaguar and Land Rover. Now, regarding Jaguar and Land Rover we’ve said in the past that we are assessing our strategic options, and that we have retained financial advisors to help. We also indicate that we have been in contact with a number of interested parties. We are now exploring in greater detail the potential sale of Jaguar and Land Rover with selected parties who’ve expressed interest. While no decisions have been made at this time, we’ve concluded that…

Thanks, Alan. And on to slide seven, and this slide provides a few details of the profits that Alan just described. Starting at the bottom of the slide, for the second quarter our net income was $750 million. This included a $32 million in profit from discontinued operations, which reflected a gain on the sale of AAP Co. Our net income from continuing operations of $718 million included Texas and areas outside of the US where we are profitable, as well as a minority interest in profitable affiliates. Adjusting for these items we see a second quarter pre-tax profit of $926 million, from continuing operations. The results include favorable pre-tax special items of 443, which we’ll cover on the next slide. These special items, our results were pre-tax operating profit of $483 million, which we’ll spend most of our time on this morning. Slide eight covers our special items, which improve pre-tax profits by $443 million. This included a 55 million reduction in costs associated with separation programs in North America. This was more than explained by the decision of a net number of 1,100 hourly workers who withdrew their prior decision to accept a buy-out. In addition, there was a profit of $148 million that related to the separations. We also recorded a profit of $206 million related to the sale of Afton Martin. As Alan mentioned earlier, due to the probability of selling Jaguar and Land Rover we can no longer defer certain gains associated with hedging of foreign currency and commodity risks, so we recognize a $182 million of previously deferred gains. Additional charges to the second quarter were about $150 million in PAG, personnel reductions and other restructuring actions, including the closure of the Lanington Casting Plant. Slide nine breaks down our pre-tax profit of $483…

Very good. Thank you, Don. I'll turn to slide 31 and turn to the forward looking outlook and share with you our assessment and where we stand on achieving our key business and financial goals over the next few years. We remain committed to our plan, and as Don said, the improvements we are seeing this year will help us meet our 2009 profitability targets. We are on track to meet our North American cost reduction target of about $5 billion by 2008. And we're also making price people want and value and that they are performing well in the marketplace, and we are making progress towards stabilizing our retail market share. In the improvements we've seen our cash flow this year should allow us to use less than the $17 billion we previously projected, defend operating losses and the restructuring of our business during the 2007-2009 timeframe. Slide 32, in summary, as you have seen, our second quarter results are very encouraging. They indicate that our plan is taking hold and producing results, but we have a long way to go. Then let me leave you with a few words of progress. We expect our automotive operations to show continuing improvement to 2006 levels. We're addressing our capacity issues. We are deploying our capital wisely and we're working as a global team to meet our goals. We completed the financing part of our plan and we are moving forward to strengthen the balance sheet and reduce our risk profile. We have a solid leadership team in place that is working even better together to deliver bottom line results. These accomplishments are something to be proud of but we are not ready to claim victory. We will incur substantial losses in both the third and the fourth quarters, primarily in North America, but continuing to make progress. The entire team is encouraged by the progress we have seen. We recognize the challenges ahead and we remain absolutely committed and focused in achieving our plan of continuously improving our competitiveness and our business performance. With that, Donna, I would be please to take your questions.

Thank you, Allan. Ladies and gentlemen, we are going to start the Q&A session now. We have about an hour for Q&A's. We will begin with questions from the investment community, and then take questions from (inaudible) also on the call. In order to allow as many questions as possible within our timeframe, I ask that you to keep your questions brief. With that, Bill, may we please have the first question?

Thank you very much, ma'am. Your first question comes from the line of Jonathan Steinmetz of Morgan Stanley. Please proceed.

Great, thanks. Good morning, everyone. A few questions. First, you talked about the net product costs versus the pricing. Don, you've mentioned the impact of the diesel engines. Are you more than recouping that particular increase in terms of pricing or is there still some margin degradation out of that.

Well, I'd answer the question this way that our total product ads including their regulatory for the diesel, is about offset by pricing. Without going into any details about one aspect or another, in total, we're recovering it, with some ups and some downs.

Ok. You took your cap banks for the year, at a time when, for example, GM is increasing theirs, can (inaudible) cause that, and do you think that’s something sustainable as we move out into ‘08 or ‘09 this type of a level. Don Leclair: Well, I think Alan mentioned, and we have been talking about trying to work more together and leverage our global assets, and we said that we would be at or around 7 billion the next couple of years, that’s the level we have been running at, we’ve actually been running a little bit bellow it, as we’ve trying to make efficiencies. Our plants, we are in fact in the process of closing plants, so we are, we have not changed our product plans at all, and we are doing a little better in the non product spending, and being more efficient in delivering products for less investment. So I wouldn’t be concerned about it, except that we are doing better at delivering the same for less, which is has been our goal.

Okay, lastly on the cost reduction side, you talked about ’08, ’09 and beyond (inaudible) costs and product development type of stuff flowing through, it seems like there is a little bridge between now and then. If you think about the next two or three quarters, where do you think you can see the most incremental cost reduction? Don Leclair: I think we are going to see most of the cost reductions on our own internal costs as we continue to restructure our operations particularly in North America, and that manufacturing is product engineering and general staff and overhead areas. Now on the material costs, or product cost side, we are seeing a lot of cost increases on commodities, and we are adding content to make our vehicles even more desirable in the market place, and we are realizing the pricing on that as you can see from our results.

Ok, I will stop there and get back in the queue, thanks. Operator: Thank you very much sir. (Operator Instructions). Our next question comes from the line of Chris Ceraso of Credit Suisse. Please proceed sir. Chris Ceraso, Credit Suisse : Thanks, good morning Don Leclair: Good morning. Chris Ceraso - Credit Suisse : Can you give more of a breakdown on how much of the $600 million in increased product costs you would assign to materials versus how much is some of these regulatory component adds and then how much for some of the other features. I think last quarter you highlighted it was upwards of $5 or $600 million just on the material side, is that about right and is it still tracking at that level? Don Leclair: Yea, That is about right. It is still right about $500 million, so almost all of it was raw materials, then within that we had product cost increases, as well as design costs and supplier initiated cost reductions Chris Ceraso - Credit Suisse : OK, and then on the other side of the favorable $600 that you said was from pricing, how much of that is tied to lower incentives versus how much from mix, with mix in the other category, so for example, launch of the Super Duty carries a higher price, did that show up under price and if so, how much of $600 was related to that? Don Leclair: I assume that you are talking about North America now? Chris Ceraso - Credit Suisse : Yes, exactly. Don Leclair: Yes, about a third of it is pricing, and about a third of it is lowered incentives, and the rest is improved business mix and the effect of improvements in Canada and Mexico. Chris Ceraso - Credit Suisse…

Thank you very much sir. Ladies and gentlemen your next question comes from the line of Rod Lache from Deutsche Bank. Please proceed. Rod Lache - Deutsche Bank: Good morning everyone. Could you just take a step back and talk about the operating environment. Do you think that would support a more favorable pricing environment that’s sustainable? Is there an improving supply/demand dynamic occurring? Or is this just something that you would expect to be kind of volatile going forward?

It’s hard to say, I think that what we’re seeing now is a strong acceptance of our product and that’s fundamentally what drives the pricing. There were always in the environment that we’re in and right now we have seen a lot of raw material cost increases. Everybody is seeing those and we’ll just have to see how it goes, going forward. They key for us is having good products that people value and want to buy. Rod Lache - Deutsche Bank: Ok, and can we talk about the new cash burn projection for this year how much of that would you say is from operations and how much?

I’d say it’s mostly from the operating side. Rod Lache - Deutsche Bank: Do you have an estimate from the restructuring part of it?

It’s going to be a little bit lower than what we anticipated before on that and we’ll be a little better on the operating side. So the seventeen, maybe it will be 15 or 16, something like that and I’d say about a third of the improvement will be from restructuring but with the balance or most of it from operating results. Rod Lache - Deutsche Bank: OK, and then my last question is just generally if you can about, I know you don’t want to get into details of negotiations, but obviously there’s still a lot of talk about restructuring legacy obligations, that kind of thing. Aside from proceeds from asset sales, could you just talk a little bit about your strategy on funding? You’re obviously making moves to improve your balance sheet. Would you think about using equity as a means of funding any kinds of restructuring initiative in that regard?

Well, let me talk just a little bit about that and then I’ll turn it over to Alan to talk about the bigger issue, which is how we’re doing with the union. But our plans are to put ourselves in a position to improve our balance sheet and to improve our operating results if we do things right, both of those get improved in tandem. We’re not really going to go in to details about how we might or might not do something. The important thing is that we’re striving to be competitive.

I would just add to that it starts with our competitiveness and I’m very encouraged by not only the dialogue now associated with this contract under negotiation, but also the work that we have done with the UAW on our cooperative operating agreements over the last few years that has significantly improved our competitiveness and soothe most important thing is that we deal with all the elements of competitiveness and as Don pointed out with what we’ve done on the financing so far and the timing of it, we’re in a real good position now going forward to be able to fund the restructuring and new product development and continuing to improve our competitiveness. Rod Lache - Deutsche Bank: Ok, but you’re not willing to talk a little bit about the future funding mechanism for that, would you use equity if that were an opportunity or would you be looking to reduce cash or re-lever the balance sheet?

That’s clearly an option for us that we have under consideration. Rod Lache - Deutsche Bank: Ok, thank you.

You bet.

Thank you very much sir. Ladies and gentlemen, your next question comes from the line of John Murphy of Merrill Lynch. Please proceed. John Murphy - Merrill Lynch : Good morning. On net pricing, it seems that it was a pretty big positive in the quarter and I hate to ask this question again, but when we looked for financial services, the depreciation on leases or the expense went up which would indicate that there is lower residual value being priced into your used vehicles. It seems like there is a disconnect on what’s going on with new vehicle pricing on net pricing and what’s going on with your (inaudible). It just seems like the net pricing is going to be tough to keep as a positive going forward. I just wonder if you can comment on the connection between the two of those.

Yes, I don’t think there’s any great connection between the two of those, John. What we’re seeing is residual values and overall, they’re improving a little. What we’re seeing here is it may be not as much as we’d thought, and that change is mainly in the pickup trucks and the large SUVs, which is no surprise, I think. So what we’re seeing is a lower auction price than we planned for vehicles that were coming off fleets from 2,3,4 years ago, and that’s fairly with the second quarter net pricing, which reflected a good mix getting out of the daily rental stuff, that will help our residual values in those vehicles going forward. I wouldn’t really connect those.

I might add, John, too, that our plan was to significantly reduce the rentals and we’re essentially in that plan now and by October we’ll have achieved our 30% reduction in the rental share over 2006. So I think we’re getting a little bit of help by being a little bit ahead of plan. John Murphy - Merrill Lynch : So, it sounds like the pricing in the used vehicle market is still lagging your efforts and ultimately the residuals should be improving there? Because I mean, there is some connection here in the residuals and the used versus the new pricing.

Well, there is, except that I think, as I was saying, most of the change in the residual values that you see in the credit card company side is in the large pickup trucks and the large SUVs, and those are not the ones generally in our fleet. So, we will see an improvement in residual values. We’re starting to see that now, that’s mainly in the passenger car side, and in the smaller SUVs, and we expect to see more going forward. At the same time, we would expect to see maybe some improved pricing, even in the daily rental side of things. John Murphy - Merrill Lynch : Ok, second question on the level of integration with Volvo. I mean, it sounds like Ford of Europe has actually moved pretty far along on integrating platforms with Volvo, particularly the S60 and S80. I mean, would that be concern going forward, or how do you think about then when you’re going through this strategic review?

The way we’re thinking about it is that we have so many relationships with so many other partners and suppliers, that as we complete our strategic review, that I would anticipate that we would have a continuing relationship with whomever we agree to participate with going forward. It wouldn’t be a problem because we’ve been able to, especially with our relationships to date. But clearly that would be an important part of the plan. John Murphy - Merrill Lynch : Ok and just one last one on the pension and OPEB. Are you guys re-measuring that every quarter to adjust your expenses, because typically wasn’t that done on an annual basis?

We’re doing it certainly more often now, and you’re right, it used to be once a year. And now with the major changes in employment, we’re doing it more frequently. And on that point, we had a question earlier about $400 million improvement in pension and OPEB, and the UAW class, it mentions about $160, so let’s say $200 million on a rounded basis. The pension asset returns improved, that’s about $100 million, and the ongoing impact of pension curtailment, that’s about $100 million. John Murphy - Merrill Lynch : So, those benefits or changes are rolling into the income statement faster than they would have traditionally?

At this point, yes. John Murphy - Merrill Lynch : Ok, thank you very much.

Ladies and gentlemen, your next question comes from the line of Himanshu Patel of J.P. Morgan. Please proceed.

Hi, two questions. First, when you look at the sequential North American profit, I know you went from a loss of about 600 to slightly under 300, is there any way, Don, to give a little bit more color on what happened there. Particularly, you know, I’m thinking, how much was the better availability of the price of the super duty. How much of that was the really the main driver there, sequentially?

Well, we can. I think the main driver of the improvement was volume.

Ok, and actually that brings up another good point. I think your Q2 production that you reported of 811,000 units, isn’t that higher than what you originally had planned by about 40,000 units or so?

We are checking here. That doesn’t sound right, that we’d be that far off, but let us get back to you on that later in the call.

Two other questions. If you exclude PAG, it looks like the international profits are about 90% higher than I think where they were Q2 a year ago. Any color on the sustainability of the margins that you’re seeing in some of these regions, particularly Latin America seems like it’s doing double digit margins now.

Well, certainly we’re doing very well in South America. We’re capacity constrained and our product acceptance is really high, and the exchange rates. Almost everything is going in our favor there right now. In Asia Pacific, we’re in the midst of some restructuring, and the guys have really gotten on top of the costs there now. And so we’re doing better there. I would expect to improve in Asia Pacific. And Ford of Europe is just now entering a period where we’re going to be reaping the benefits of the larger car investments we made. We’ve got some new smaller cars coming in the next couple of years, so I think we’ll be seeing upside on the operating margins of Ford of Europe as well.

Ok, and then maybe a question for Alan. The decision to put Volvo under strategic review, how much of that would you say was driven by desire to strengthen liquidity versus a desire to streamline the portfolio and eliminate, let’s say distractions from the North American turnaround?

Sure, I think I’d characterize it as considering those factors and even more, because clearly the real opportunity going forward is to integrate and leverage our Ford assets around the world, and we’ve made significant investment, as you know, in all the PAG brands. They’re on real positive, profitable growth plans, and it just was clear to us that this was a good time to review our portfolio and decide the best things for all of our brands going forward. And of course as you pointed out, it’s also very important for us, as we’re leveraging the company, to work on improving the balance sheet going forward. So it’s all related, but it’s really driven by what is the best thing we can do for long term value creation, starting with the Ford brand, and integrating that. And doing the best thing for everybody associated with the other brands.

Ok, and then maybe one last question for Don. Can you give us how much collateral is pledged behind the PAG assets?

No, we’re not going to go in and say how much there is, just that, you’ve mentioned proceeds from the sale of Volvo and liquidity, I’d ask you to think about it more in the sense of proceeds from the potential sale of Volvo and strengthening the balance sheet. I don’t want to go into the exact collateral, but I will go back and answer your question about the production. In April, we defined, we indicated Q2 production would be 810, it came in at 811, but our prior guidance had been 770, so you’re right, it was up 40,00. What we indicated at the time was that we were a little short of inventory on a few selected vehicles and we were pulling production ahead from the third quarter to the second quarter, so that didn’t really affect our overall sales outlook for the year, just our desire to make sure that we had sufficient inventory for a few select vehicles for the summertime.

Thank you sir. Ladies and gentlemen, your next question comes from the line of Rob Hinchliffe of UBS. Please proceed.

Thanks, good morning. Don, you said year to date so far things that have gone a little better than planned, you said one of them obviously was profitability. Is there a particular area so far that you’re running a bit better than you would have expected six months ago? Is it pricing, or something that you could call out?

Well, I think there are a couple of them. In the order of where they’re greatest is PAG, South America, Ford of Europe and Asia Pacific. So they’re all doing a little better than we planned. Things are also going well in the credit company and because of that our cash balances are higher, so our interest income is higher, so our net interest is lower. And then we're also doing better in North America. Now, within North America, we're doing a relatively better outside of the US than within the US, but doing better even within the US and that would mainly be on the cost side, we're a little bit ahead of schedule, getting some of the people out, in part because of competitive operating agreements and getting the plants on schedule or a little ahead. And then on the pricing side: we're doing a little better than we'd thought on pricing. The mix has been stronger, the mix on the edge has been higher on the high series, so just, a whole range of things have been favorable for us.

Pretty much across the board, I guess.

Yep. And I can really summarize it as productivity and our quality.

On the productivity and with these comparative operating units, is there a way to put a dollar figure on how much they're contributing to the cost savings so far?

We have quartered the figure before, that when fully implemented in the competitive operating agreements have largely been agreed and they're being implemented now, but they're not fully implemented. I'd say it's somewhere in the $500 million range on an annualized basis when they're fully implemented, which they aren't quite yet.

And, on the pricing side, things certainly look like they're getting more competitive, heating up a bit, but what are your thoughts there? How sustainable going forward is Ford's ability to maintain pricing? And then obviously a large role quarter to quarter. What are the assumptions right now for the back half of the year, or I should say, for the third quarter, I guess?

Well starting on the net pricing side, on the revenue side, we're very encouraged with the response we're getting from them, but especially on the Focus, the Fusion, the new Taurus, and then the crossovers—the Escape and the Hybrid in the edge, and the continuing strength of the larger SUVs, and with the content and the continued fuel economy improvement, I think going forward, our fundamental assumption is that we will competing, we are recognized for those improvements.

Do you want to mention stuff about the residuals?

Yeah, I was going to say that. I think going forward, we usually see the prices in a sense lowest at the end of the model year, so we'll be selling down the old models and filling up with the other ships with the '08 model. So that's an important factor on the pricing side. Then just referring to slide 29, sequentially from second quarter to third quarter, our volumes are down significantly as you would expect because we went from 811 in North America to 640. 512 to 410 in Europe, and 193-168—that's a large reduction in volume and that's really what we're referring to earlier when we said there was a big causal factor for the sequential improvement from first to second, similarly second to third is going to be down.

That's why the profits will be tough in the third quarter and why the cash flow will be that plus the timing difference I mentioned on the marketing.

Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Peter Nesvold of Bear Stearns. Please proceed.

Hi, Brian Brinkman, for Peter Nesvold. Keeping that public finances is unavailable for Allison and Chrysler Auto, how confident are you that financing is available for a Jaguar or Land Rover sale? Does it appear there's likely to be committed financing in place?

Well that's hard to say. Clearly the market's a little tougher than just a month or so ago, but, we're still in the early days of going through that. Those are terrific brands, and we expect to be able to—it's probable that we'll be able to complete the sale. That's why we took the decision that we did, and we really can't speculate on what the markets will be and we completed our financing and we did a fair amount of unsecured financing for credit earlier this year so we don’t really have any direct financing needs right now.

Ok, I appreciate that. Also, on Slide 11, you said that improved warranty expense was $1,100 dollars of the 1.1 billion year over year improvement. That’s a discretionary item. Is the improvement sustainable, would you say, at these levels?

Well, that is not a discretionary item, we have a pretty strict and rigorous accounting process that reflects what we actually are paying to our dealers for warranty expenses as we reimburse them for customer claims, and we do that on a conservative basis and in arrears of the actual experience, so it’s not discretionary. Now there are some items that are non-repeatable because they reflect reserve changes, but the ongoing trend in the quality, they are favorable, it is improving, we expect to see improvements going forward; perhaps not at that level.

Ok, thank you very much.

Thank you very much, Sir. Ladies and Gentlemen your next question comes from the line of Robert Barry, of Goldman Sachs. Please proceed.

Hi Guys, Good morning.

Good morning.

I also had a question in the context of this meltdown we’re seeing in the high yield market. Assuming that continues and you’re able to negotiate some sort of settlement with the union, on [OPEB], are you comfortable funding that out of equity?

We’re comfortable that we have a plan to make the Ford Motor Company competitive. It involves a lot of moving parts, as Alan was saying earlier about the union discussions. We’re comfortable that we have a plan. Our goal is to make the company competitive. We really don’t want to go into any details.

Ok. How about your outlook on the luxury market, and what is your strategy going after the luxury market, if all the PAG brands are gone.

Well we’ll clearly have our Ford Lincoln Mercury line up, and we know things we’ve been thinking about as we review our portfolio is going forward in respect to the entire product line. I think it’s interesting to note that most of the automobile manufactures are really focusing on different elements of this segment and that’s an important part of our consideration, going forward.

Like take it, wouldn’t it involve, just a lot of additional investment in Lincoln?

Well, I think it’s too early to say that. We have continued to invest in the Lincoln Mercury lineup. We have a very strong lineup today as recognized by the quality and productivity and the safety and recognition, so we’re not disadvantaged at the present time; I think the real question is how do we build on that success going forward.

Ok, and then finally, just a housekeeping item. Can you tell me what the gross automotive debt was at the end of 2Q?

Approximately $30 billion.

Ok, thank you.

You bet.

Thank you very much, and the next question comes from the line of Ronald Tadross, Bank of America Securities, please proceed.

Good morning, everyone. Just two quick questions here. First on Slide 14, you mentioned that the mix had offset some of the negative volume effect. So, maybe if we just assume, I don’t know, you can correct me if I’m wrong, but maybe the mix is in the plus 100-$200 million range. Where is that coming from and what is the outlook on mix?

Well, the mix is actually a little more than that, wherein that the volume is a larger reduction and the mix is more favorable than you were quoting and the outlook for the mix is, right now it looks good. We had been going through the last couple of quarters a period where we were getting back into the car business as it were, and we had the Fusion and [Milan] the Zepher, and our unit revenues in North America were going down(inaudible) and now we’re getting back and improving our per unit revenues.

Don, is it over $300 million?

It’s about $400 million.

And is it coming from daily rent at all, or is it all just product megs, like retail product megs?

It’s a whole series of things including, importantly, the discontinuation of Taurus and the FreeStar which were heavy into the daily rental, higher volumes the F series, particularly the new super duty, the Edge, both the newness of the product and the lower discount, as well as the high mix, high series mix there, and several other factors.

OK, so are we at all concerned about gas prices here on mix. Could that put a damper on this going forward.

Well, we are concerned about fuel prices, and we have seen a decline in F-series sales volume decline, which at least in part reflects higher gas prices, and lower housing in the construction sector, and the fact that emission laws changed at the end of last year, so we think some truck sales were pulled ahead into last year. But the mix of what we’re selling is richer.

Ok, and then just one thing on cash flow. I know you said the restructuring spend will be a bit lower, but if we just stick to your original numbers for a second, I think you guys said about 5 billion in 2007 and 2 billion in 2008 will be spent on mostly reducing heads. It looks like you only spent 1.6 billion so far, maybe just see if those numbers are accurate, but also, where does this bell curve come here in the spending on restructuring.

Well, I think we said we’d have about four, not five, so it was about four this year. We’re going to be a little less than that. And that’s a combination of things, the mix of people that are leaving on the hourly side is different in terms of which packages they’re going out on. And again on the salary side a lot of the people, a higher proportion of them went out on retirement packages than we’d initially estimated, and those people went out and then a lot of debt cost that’s actually funded through the pension plans. So there’s a couple of reasons why it will be lower, but the important thing is that the people that we said are going to go, and the numbers in the plant closings, we’re on or ahead of schedule, it’s just costing us a little less to effect that.

Thank you very much sir. Ladies and gentlemen, we will now start taking questions from members of the media on the call. Our first comes from the line of Mickey Maynard of the New York Times. Please proceed.

Good morning everybody. I have a question for you about this quarter in general. From what Mr. Mulally said about the third and fourth quarters, it sounds like this might be more of an anomaly than a trend, and I wonder if you could talk about that. I mean, second quarters are traditionally when you do well and I think you earned something like $1.7 billion back in 1994 or something like that. So is this kind of a one-time occurrence and we’re going to have some bad, maybe three bad quarters and then another good second quarter? How do you see it shaping up ahead?

No, I don’t think so Mickey. The way I would think about it is we’ll continue to improve. And as we pointed out, the third quarter is traditionally lower because of the lower volume, but overall, as you noted, we improved the guidance for the year-end 2007 also. So I think it reflects more the tradition of the third quarter, but overall, for the fundamental automotive operations, our plan is to continue to improve and get to profitability in 2009.

Ok, I’m sorry, but you did say significant losses in the third and fourth quarters. Did you only mean the third quarter?

I think that when we say the losses, clearly for the year we’re going to lose, mainly because of North America. So we haven’t changed that, overall for the year we think the losses are going to be less that what we had in our plans or a little bit ahead of plan. But clearly we’re still finding our way back to profitability in North America.

Ok, and the last thing I wanted to ask you is, over the last couple of months, there’s been sort of this whispering campaign that if Ford has another couple of bad quarter, then you could end up considering Chapter 11. First of all, have you heard that yourself, and second of all, given this quarter, should we stop talking about that possibility?

That certainly is not in our plan, and when we put this plan together, over the last year, in addition to operate profitably, that’s just the absolute cornerstone of the plan, accelerating the development of the new products to stabilize the market share and then start to possibly grow again, of course the third piece of the plan was to secure financing for both the restructuring and for the bringing in the new products on line and we are really pleased with going to market when we did, and the response we got from everybody. So we’re in great financial shape and liquidity and now our plan is and what you are seeing here in the second quarter is to keep improving the fundamentals of the business and bring out the new products and get back to profit building and then possibly grow the company, so we are talking about that, and what I could understand from the history, why some people would, but clearly we are very, very encouraged with the progress we are making on this plan.

Thank you.

You bet.

Thank you very much Ma’am. Ladies and gentleman, your next question comes from Tom Kirsher of Associated Press. Please proceed.

Hello gentleman. There are rumors swirling around over in India about the jag sale being tata, they one of the automakers over there and that it may come as soon as this week. Will it happen that fast, is there any truth to that?

Maybe, ask me the question again, I missed, you cut out on part of it.

I am sorry. There are rumors floating around in India that the Jag Land Rover sale would be too Tata and that it could take place as soon as this week. Is there any truth to that?

Did you say this week?

Correct.

Oh, I think that’s a bad rumor. No, clearly that would not be the case.

Ok.

The way we characterize it is that with the response that we are getting, which we are very encouraged about, we are now moving to a next stage (inaudible) failed discussions with all of the people that have shared interest.

Ok.

And we have no comment on the people that are interested at this point.

Ok, very good. The other question I had was, there, a lot of people are saying that it is bad timing to have a good quarter, and going into the contract talk, do you think this will have any impact, your positive results here, will have any impact with on talking with the UA government.

Absolutely not. The neatest thing about working closely with the UAW and with everybody over the last few months is that everybody really does understand the situation we’re in and just like we pointed out, we still lost $279 million in North American operations, and we have a lot of work to do to get back to profitability. And the way we are approaching this is that long term we need the key element of our competitiveness so that we can compete with the best in the world. And we all know that, and all our participants know that, and that’s our focus, and we’re making great progress on that. Now respect that, I think it’s never a bad time to have a good quarter. And again we’re very pleased and we’re very encouraged that our, that we are making such great progress on the plan.

Thank you, I’ll sneak one last one in here. Can you say, give an estimate on the cash burn at all, you said slightly less than the $17 billion that you had said previously.

Yea, we said earlier 15 or 16 might be a better number the way it looks.

Ok, thank you.

You bet. Operator : Thank you very much sir. Ladies and gentleman, your next question comes from the line of Peter Woodman, Press Association News, please proceed.

Yes, this is Peter Woodman, from the Press Association in London. I’d just like to ask, Mr. Mulally, (inaudible) what assurances he can hold out for the staff in the UK, working at Land Rover, and Jaguar, if the companies are to be sold as far as the plot retain appliances is concerned and also about jobs?

I think that the most important thing that we talked about are these two great brands and the fact that we have continued to invest in these brands, and they’ve got great products, and they got even more products coming online, they’ve been working their productivity, increasing their competitiveness, so no matter what we decide going forward, I see a very bright and very exciting future for Jaguar and Land Rover. And they’re continuing to create their future with all of the actions that they’re taking today on their quality and productivity, and they’re going to be great.

And could I just ask what sort of time scale we are looking at. You said with some amusement it wouldn’t be this week, but what sort of time scale are we looking at?

We haven’t put a specific time frame on it, but what we’re doing now is moving to the next step of more detailed conversation with the people that are interested and we’re very encouraged by the response that we’re getting, and we’ll keep you informed as we go.

Thanks very much.

Thank you sir. Ladies and gentlemen, you next question comes from the line of Bill Koenig of Bloomberg News. Please proceed.

Good morning. I’ll take one more stab at Jag and Land Rover. Given that you said earlier on the call that you’re recognizing the edges on Jaguar and Land Rover, what’s the likelihood that it would be sold to whomever. I mean, are we looking at an 80% or 90% thing, or a 50/50?

Bill I’m really sorry but you’re cutting out there and we cannot hear you.

Sorry about that, I’ve got a new headset here. Is that better?

Uh, a little bit.

OK, what I was asking is what is the likelihood that Land Rover and Jaguar will be sold to whomever? Not asking about any specifics, but are we looking at an 80/90 percent likelihood, a 50/50? I was just wondering if you can provide any color along those lines?

I think great than 50%.

All right, thank you.

Thank you very much sir. Ladies and gentlemen, your next question comes from the line of John Stoll of the Dow Jones. Please proceed.

Don, you said during your comments earlier that there were some capacity restraints in, I believe South America, Brazil, and China. You may have outlined this a little, I may have gotten a little sidetracked covering the specifics of your conversation earlier, but have you outlined what you will do about those capacity concerns. Are they near term, or is this something you’ve got to take a harder look at over the long term?

Well, we are opening a new assembly plant in China later this year, and we’re going to production of our vehicles, Ford vehicles hopefully next year, and that will be a significant increase in our capacity in China. We’re working through a series of options to economically expand our available capacity for the South American market. So we expect to address both of those in the reasonably near term.

Ok, can you discuss any of the options in South America?

No, John, I think we’d rather not. It’s been a series of things we’re going through to evaluate what’s the most economical way to provide capacity for the South American market.

Ok, and I guess just to clarify, because there’s been a lot of questions about the UAW and how you’re going to finance a supposed [VIBA] deal or something of that nature, restructure the way that the liabilities are on the balance sheet right now. Are you confirming that’s something you’re looking at? That’s a Viba or something equivalent to unloading some of these liabilities? If so a) have you discussed this with the union yet and b) have you discussed this with GM and Chrysler as something that all three of you could do together?

We are looking at every element of our competitiveness going forward. And the financing plan that we have in place will provide us with the capability to consider those options.

Ok, thank you gentlemen.

Thank you very much sir. Ladies and gentlemen, your next question comes from the line of Tom Walsh of the Detroit Free Press. Please proceed.

Hello guys. In that vein, I was going to ask specifically about your healthcare spend. What was your healthcare spend total in 2006, what will it be in 2007 and what change in that healthcare spend do you anticipate out of labor negotiations.

Are you talking about the total or just the hourly retiree or what?

What piece of it? Hourly retirees are what I’m most interested in, but however you have it and can get at it.

Well, last year, I think our expense was about $2 billion a year. That’s what it was last year. It will be less than that this year because of the changes that we made.

Right, GM said theirs went down by about a half a billion largely due to the changes already negotiated. I have a number on your change

We said before, our agreement that we negotiated and was approved by the courts last year, saved I think $640 million.

Ok, and do given the closeness of the vote to get that deal, the 51%, how much more do you think you can realistically get going forward as you launch into contract negotiations?

As we’ve said a couple times before, we’re really not going to comment on that today. I mean, we had a history of a really good relationship with the union, and we don’t discuss it publicly.

Ok, thanks.

You bet.

Thank you very much sir. Ladies and gentlemen, your next question comes from the line of David Kylie of Business Week. Please proceed.

Hi gentlemen. I wanted to ask, you talked about CapEx earlier, and how it’s stable about 7 billion. Have you started to dial down future investment in the brands that you’re planning to sell yet, and do you know if the likelihood is that you’re going to get rid of Volvo, and Jaguar and Land Rover, how will that affect CapEx in the next couple of years? Will you channel that money into the remaining brands or do you expect CapEx will go down?

With respect to your first question, David, we have not scaled back our plans. We’ve focuses them even more on product development across all the brands, and the improvement that we’re seeing is part of our strategy to improve the efficiency of our product development going forward. And I think we’ll continue to see that improve as we simplify the product lines, simplify the offerings, and reduce the complexity of the vehicles, and as that flows through the entire value stream I think we’ll see continuous improvement in the productivity of our investment in new products. And with respect to your second question, maybe share a little bit more about what you’re thinking there.

Well, I just wondered if without those brands to fund, if you expected to keep the level where it is and channel that into more products for Ford, Lincoln and Mercury, or would you expect, in terms of lowering your overall costs going forward, would you expect CapEx to go down proportionally to what you’re spending on…

I see, I understand now. Our thought about that clearly is the competitiveness of our product line and we’re really encouraged with the Ford Lincoln Mercury brand, with the progress we’re making and the customer acceptance. Especially with the improvements that we’re making in initial quality and long-term quality and the appeal of the vehicles, and the recognition for the safety enhancements. And the product line with the Focus and the Fusion and the new Taurus and then the crossovers with the Escape and then the hybrids edge along with the bigger SUVs and the trucks. It seems to us that we have a very competitive product line that we just want to keep a real consistency of purpose on that product line, and then continuously improve each of those models year after year. That is what we have reflected in our capital spend, and so I don’t see much change to our plan going forward.

And just kind of a quick part two, on Jaguar and Land Rover, I’ve seen estimates from Wall Street on what you would net out from a sale of that, and there’s a broad range. I’ve seen as low as a $1.5 billion and I’ve seen as high as $6.5 billion, for the two. I just wondered from your perspective, which of those you thought was closer to it.

Yeah, we have no comment on that at this point, David.

Thank you.

The neat thing is that clearly we have continued to invest in new brands, and they’re terrific brands and they’re in great shape and it’s a good time to review the best thing for everybody going forward.

Thank you.

You bet.

Now we have time for one more question.

Thank you very much ma’am. Your last question comes from the line of Bryce Hoffman of the Detroit News. Please proceed, sir.

Congratulations gentlemen.

Thanks a lot Bryce.

I just wanted to ask you Alan, talking this week with Ron at UAW, he’s made it clear that he wants any concessions the UAW makes in the upcoming talks to be tied to what he calls shared sacrifice on the part of Ford management. Is that something that you’re prepared to do?

Well I think as we go forward it’s going to be all about competitiveness and we expect all the skills that we have we want that world class talent, and the market drives, actually drives, the predetermination and the keeping of world class talent and the important thing is that we’re competitive at every position, throughout our entire team.

Thanks a lot.

You bet.

With that, that concludes today’s presentation, thank you for joining us.

Thank you very much ma’am and thank you ladies and gentlemen for your participation in today’s conference call. This concludes your presentation, and you may now disconnect. Have a good day.