Tom Walsh - The DetroitFree Press Jere Downs - The LouisvilleCourier-Journal Tom Krisher - The Associated Press Mike Spector - The Wall Street Journal Jeff Bennett - The Dow Jones Rick Popely - The ChicagoTribune Bill Koenig - Bloomberg News Bryce Hoffman - The DetroitNews Sarah Webster - The DetroitFree Press Poornima Gupta - Reuters

Welcome to the Ford Motor Company's third quarter earningsconference call. (Operator Instructions) I would now like to turn the conference over to your host for today'spresentation, Ms. Lillian Etzkorn, Director of Investor Relations. Pleaseproceed, ma'am.

Thank you, Bill and good morning, ladies and gentlemen.Welcome to all of you who are joining us either by phone or webcast. On behalfof the entire Ford management team, I would like to thank you for spending timewith us this morning. With me this morning are Alan Mulally, President and CEO;and Don Leclair, Chief Financial Officer. Also in the room are Peter Daniel,Senior Vice President and Controller; Neil Schloss, Vice President andTreasurer; Mark Kosman, Director of Accounting; and K.R. Kent, Ford Credit'sCFO. Before we begin, I would like to review a couple of quickitems. The focus of today's call will be the third quarter financial results.We will not discuss our recent labor negotiations with the UAW. Once thetentative agreement is ratified, we plan to host a separate conference call toreview the specifics. We ask that you refrain from any questions related to thecontract today. A copy of this morning's earnings release and the slidesthat we will be using today have been posted on Ford's investor and mediawebsites for your reference. The financial results discussed herein arepresented on a preliminary basis. Final data will be included in our Form 10-Qfor the third quarter. Additionally, the financial results presented here are on aGAAP basis and in some cases on a non-GAAP basis. The non-GAAP financialmeasures discussed in this call are reconciled to their GAAP equivalent as partof the appendix to the slide deck. Finally, today's presentation includes forward-looking statementsabout our expectations for Ford's future performance. Actual results coulddiffer materially from those suggested by our comments here. Additionalinformation about the factors that could affect the future results aresummarized as the end of the presentation. These risk factors are also detailedin our SEC filings including our annual, quarterly, and current reports to theSEC. With that, I would like to turn the presentation over toAlan Mulally, Ford's President and CEO.

Thank you, Lillianand good morning to everyone. We will begin by reviewing the key financialresults for the third quarter. Don will take us through additional details andthen I will come back and wrap up before we take your questions. I'm going to start with slide 2. As shown at the top of theslide, vehicle wholesales last quarter were nearly 1.5 million units, up 20,000from last year. Total company revenue of $41.1 billion was up about 11% from ayear ago. The increase includes favorable net pricing, exchange and mix. Profitbefore tax from continuing operations was $194 million, up $1.3 billion fromlast year. This includes a $1.5 billion improvement in automotive operatingprofits, partially offset by lower profits at Financial Services. Our third quarter net income was a loss of $380 million,including $350 million of pre-tax special charges. We ended the quarter with$35.6 billion of gross cash, a decrease of $1.8 billion from the end of thesecond quarter. Overall, we are making significant progress implementing ourplan. For the first nine months, our pre-tax results from continuing operationsimproved $2 billion from last year, and net income has improved $7.1 billion. Now turning to slide 3, we continue to focus on the fourpriorities of our plan: (1) Restructuringthe company. (2) Acceleratingproduct development. (3) Fundingour plan and strengthening our balance sheet. (4) Workingeffectively as one team globally. We're taking the necessary steps to implement our turnaroundplan, and we are on track to achieve our goal of profitability in 2009. Overall,our automotive operations improved substantially in the third quarter. In North America, results improved by $1.1 billion compared with last year,although the loss was $1 billion. During the quarter we reduced personnel by6,800 people. Ford South America, Ford Europe, Ford Asia Pacific and Africa,and Mazda also reported profits for the third quarter. All of these businessunits except…

Thanks, Alan. Let's move on to slide 6, which provides a fewdetails on our profits. Starting at the bottom of the slide, our net loss was$380 million. This net loss included taxes in areas outside of the US where weare profitable, and excludes minority interest in profitable affiliates.Adjusting for these items leaves a third quarter pre-tax loss of $156 millionfrom continuing operations. These results include pre-tax charges for specialitems of $350 million, which we will cover on the next slide. Excluding these specialitems, our pre-tax operating results were a profit of $194 million. Slide 7 covers our special items, as I mentioned, the $350million, including $110 million reduction in costs associated with separationprograms in North America. That is largely explained bythe net decision of over 700 workers to withdraw their prior decision to accepta buyout. In addition, there was a gain of $213 million for OPEB curtailmentrelating to personnel leaving as a result of the North American hourlyseparation program. In line with the action we took last quarter, we alsorecognized additional mark-to-market gains of $37 million at Jaguar and LandRover that previously would have been deferred. Additional charges during thethird quarter totaled $78 million, mainly at Ford of Europe and PAG forpersonnel reductions and other restructuring actions. Finally, as we discussedlast quarter, we recorded a charge of $632 million related to ourpreviously-announced trust preferred securities exchange. Slide 8 breaks down our pre-tax profit of $194 million bysector, including a loss of $362 million for Automotive and a profit of $556million for Financial Services. On to slide 9, which explains the change in third quarterprofits compared with 2006. For the third quarter, Automotive results were $1.5billion better than a year ago. Compared with 2006, volume and mix was $500million favorable, with higher volume primarily in PAG and South America, and mix…

Very good, Don. Thank you very much. I would now like toturn to slide 32 and turn our attention to the full year outlook, and sharewith you our assessment of where we stand on achieving our key business andfinancial goals over the next few years. We remain committed to our plan, and the improvements we areseeing in this year give us added confidence that we are on track to meet our2009 profitability targets. We also are on track to meet our North Americancost reduction target of $5 billion by 2008. We are also making progress on ourmarket share goals. As discussed earlier, based on the improvements we haveseen in our cash flow this year, we now expect our automotive operating cashflows and restructuring expenditures to be about $12 billion to $14 billionduring the 2007 to 2009 period, a substantial improvement. Turning to slide 33. In summary, our third quarter results and the company'sperformance through the first nine months of the year indicate that our plan isworking and we are making significant progress. Let me leave you with a few additional thoughts on ourprogress. We have a solid leadership team in place that is workingeven better together to deliver bottom line results around the world. Theentire team is encouraged by the progress we have seen, and we remain committedto improving our business performance and delivering our plan. With that, I would like to open it up for questions.

Thank you, Alan. Ladies and gentlemen, we are going to startthe Q&A session now. We have about 50 minutes for the Q&A. We willbegin with questions from the investment community and then take questions fromthe media, who are also on the call. As a reminder, we ask that you refrain from asking questionson the recent labor negotiations with the UAW, because we will not discuss thespecifics until the agreement is ratified. In order to allow as many questions as possible within ourtimeframe, I ask that you keep your questions brief, so that we don't have tomove callers along after a couple of minutes. So with that Bill, can we havethe first question please?

Your first question comes from Rod Lache - Deutsche Bank.

I won't ask about the specific details of this laborcontract. But just relative to the Way Forward plan, could you just refresh ourmemory on whether the Way Forward plan included anything relative to the COAsor these opportunities that were highlighted in the labor contract?

At this point, Rod, I think the best summary is that our newagreement is very supportive of our plan to return to profitability in 2009 andthen further on.

The convert in the note that is being issued, can you justgive us the timing of that issuance?

No. Again, I knowthis is not very satisfying, but we really want to respect the UAW's processthat they are going through to vote on the agreement. I will assure you that next week followingthe ratification we are going to provide you extensive detail on the agreement.Because it really is going to significantly improve our competitiveness goingforward, and we look forward to that call with you.

Then on the operations, you guys are still showing on slide 24 a $2 billion to $3 billion operatingcash flow burn. You are at close to breakeven this year. So are you expecting,then, some kind of deterioration from here?

Rod, I think the bestway to think of that is that comparing '08-'09 versus 2007 our profits will bebetter because we are moving up, we will be profitable in '09. There are acouple of one-offs that helped us this year on our cash flow, mainly in thearea of tax that we don't expect to continue. But the big factor that drivesthe increase in the cash outflow is our CapEx will be higher in 2008 and 2009.Our operations will be improving each year going forward.

The pricing situation, it actually seems to be accelerating.Your retail market share has been pretty stable. Is this something that you seeas surprising? Is that something that you see as sustainable? Is it kind of anindustry-wide thing? Maybe just elaborate a little bit on that.

You bet, Rod. I thinkthat is a very important point to us, because it is appearing to stabilize,which is another key part of our plan because we are really focused on addingsome smaller cars and smaller utilities and the crossovers that the consumersreally do want and value, adding that to our world-class large SUVS and trucks.The response that we are getting from those vehicles is very supportive of ourplan. It looks like we are stabilizing the market share. Clearly, as we pointedout we are focused on retail over retail. We will get through this reduction tothe fleet and focus even more on our customers.

The product isbasically what is driving the improved pricing, the new products?

Yes, and Don pointed out another thing that is reallyworking on the plan. That is making sure that we have the right content in thevehicles. He mentioned that we put some additional cost in on the features thatpeople really do want. From a go-to-market point of view, that is reallyworking on the net pricing.

My last point is there is a lot of speculation this morningafter you guys changed the subvention policy with Ford Credit it seems likeultimately that would give you a lot more flexibility with Ford Credit. Itgives you the ability to separate it maybe more easily. Is there anything toread into that at all?

No, Ford Motor Creditis critical to our operations going forward.

Your next question comes from Jonathan Steinmetz - MorganStanley.

On the net price issue on slide 13, Don, you have got $1billion favorable year on year. I think you mentioned retail incentives, newequipment, and lower daily rental. Is there any way you could talk a little bitabout at least order of magnitude of each of these? How big a deal was lowerF-Series incentives relative to this number?

Well, to go alongwith what Alan was saying about the new products and trying to get the contentright, one other thing that Mark Fields and his team have really stressed thisyear is to be much more disciplined. Last year, we had the big incentiveprogram, including the 0% for 72 months; and we didn't have that this year. Sothat is a big piece of it. Nearly half of that $1 billion is just in straightimprovement in retail incentives. We have done some pricing that goes alongwith the equipment. The lower mix of daily rental was in there as well. So itis maybe half retail incentives and then a quarter pricing and a quarterbusiness mix, Canadaand Mexico andother things.

On the cost-reduction side you're flat in the quarter. Therehas been some media speculation, anyway, about you accelerating some costreductions in '08 inareas like sales and marketing or engineering and employment benefit typestuff. Can you just comment? With being flat and trying to get to the $5billion, will you publicly say you're making an acceleration in some of theseareas?

Jonathan, we willcontinue to make adjustments going forward. I think Don explained very well the situationon this last quarter. But going forward, we're very confident that we are goingto achieve our cost reduction across the entire enterprise to achieve thosegoals on the way to profitability in '09.

Similar to Rod's question on Ford Credit, turning to Volvo,you're also doing some things that suggest you want to keep it near term; butthat maybe also make it a bit more easily severable. Can you just discuss theplan there? Is the idea to fix it to sell it, or fix it to keep it?

I think the planright now is to fix it.

Your next question comes from Peter Nesvold - Bear Stearns.

A lot of news out yesterday on deferred tax assetwritedowns. If I look at the model it looks like if you lose money in 2008, isthere a risk that you would also have to increase your valuation allowancesagainst the deferred tax assets? Can you give us some kind of order ofmagnitude, perhaps?

Well, it so happensthat we did set up a valuation allowance for deferred tax assets in the USin Jaguar Land Rover in the third quarter last year. So we have done that. Thatis why our tax rates have been wobbling around this year, because we have lostmoney in some cases and had to book taxes in other areas. So we have alreadydone that.

So you don't see afurther risk in the event of a net income loss next year? Forgive me if youwent through this, but can you elaborate on the improved cash flow outlook,burning $17 billion versus now $12 billion to $14 billion. Any more color onwhat the primary drivers of that were?

Sure. There's acouple of things. First off, it is the good performance this year and how thatflows through. Then we are getting a little bit better handle on the kind ofimprovements that we will be able to make in our product development system, asan example; so lower and more efficient engineering and R&D and moreefficient capital spending. It is just a whole range of improvements across thewhole system. We just thought this would be a good time to really lay this outfor you and help you to see just how much ahead of the plan we are.

Your SAAR expectations for '08, I amassuming that includes heavies. How does that forecast for '08 compare to whatyour expectations were back in September '06, when you outlined the updatedversion of Way Forward?

Well, as you know, atthat time we set our plan for '07 at 16.8, so that was our baseline. It's goingto be a little bit lower than that. It has been lower in the second half thanthe first half. So what we are looking for in 2008 and probably at leastthrough the first half of 2009 is somewhere in the low 16s. That is a littlelower than we were planning back about 15 months ago; but I think that is justthe way it is. As Alan mentioned, we are constantly monitoring the situationand adjusting our plans, taking the necessary steps to achieve profitability in2009.

Your next question comes from Chris Ceraso - Credit Suisse.

As it relates to the cash flow, will there be more cashoutflow for severance for people that left say late in the third quarter? Orhave you gone through the bulk of that for the people that are going toseparate under the attrition program that you have already done?

There will be somemore cash outflows in the fourth quarter of this year. Now if you look at chart24, we show $5 billion to $6 billion; and I think our year-to-date is $2.1billion. So we will end up this year somewhere in the $2 billion to $3 billionrange, so a little bit more in the fourth quarter, and then the balance in '08and '09.

Can you just give us a little more clarity as to the changein your decision on the incentive accounting? Why are you doing that? Will youstill make adjustments to the accrual quarterly as you go throughout the year?

We will always makeadjustments to the reserves to make sure that they are correct. The reason weare doing it is it is just a simpler and better way to communicate to thedealers, so that they know that the incentives will be there for the entiremodel year.

Is this just ondealer incentives, or is this also on direct-to-customer incentives?

This is forincentives, all incentives.

Next question on Ford Credit. I think that you mentionedthis on the call already, that it is still a strategic part of the business. Ithink you have always said that the game plan is to get the Motor Companyfixed, so you get the investment grade rating back. Can you still run FordCredit, say till 2009 or 2010, if it takes that long to fix the Motor Company?Or do you have to pursue some other action to get cheaper borrowing coststhere?

Yes and no. We cankeep operating just fine.

What is the plan for rental sales in '08? Are you going tobring that down by another slug?

We have set our plan for daily rental and I think the lastbig delivery of the old Tauruses to the daily rentals was in October of '06. Sowe are going to be staying on our plan, but the year-to-year reductions in thedaily rental side will be less going forward. Having said that, we are veryfocused on making sure we have balance and not to oversupply our vehicles tothe daily rental sector.

Your next question comes from Himanshu Patel – JP Morgan. Himanshu Patel - JP Morgan: Europe was pretty strong this quarter.Could you talk a little bit about the sustainability of those profits into '08?

The reasons why we are doing well in Ford Europe are prettystraightforward. We have sized the place. We lowered the capacity to meet thedemand. We accelerated the product development, and we have got a great line oflarge cars out now, Galaxy, SMAX, and the new Mondeo. We have got a whole lotof new product coming next year. Our cost base is good, our plants areoperating as capacity, and our products have been very well accepted. So we dothink it is sustainable. In fact, we would be disappointed if we couldn'tcontinue to improve. Himanshu Patel - JP Morgan: Don, on slide 24, the accelerated subvention payments, thetarget there seems to be $5 billion up from $2 billion. Can you tell us howmuch of that increase has already been done, if any?

Well, we haven'tstarted that yet. Accelerating the subvention payments will start on January 1.So what this means is our plan had been to do $2 billion during the period, andtwo things have happened. One, the amount of subvention has grown because thatis just the way it ended up, because there were more programs, particularlylast year, where Ford Credit was used by Ford to sell vehicles. So the balancegot bigger. Then, we have decided to start earlier. We were going tostart around the middle of next year, and we decided to do this on January 1.So whereas it was going to be $2 billion from like midyear '08 through the endof '09, now we expect around $5 billion for '08 and '09. As I mentioned, weexpect that balance to eventually run off sometime in 2011. Himanshu Patel - JP Morgan: On that same slide, I don't know if you can answer this ornot, but would the restructuring costs forecast materially change with theimplementation of the UAW contract? Or would you feel comfortable saying thatthat is still a good number that we can use?

Maybe you could savethat question for the conference call that Alan mentioned earlier. We would behappy to take that up then.

Your next question comes from Jairam Nathan - Banc of America Securities.

In context of what you guys said about South America, on your market share loss, I'm just wondering. Given allthese cash outlays for restructuring, does that put you at a disadvantage ininvesting in emerging markets? How should we think about the sustainability ofSouth American profits?

Well, I think youasked a two-part question. One, are we going to invest in growth markets? Ithink we have good plans in Chinaand Alan mentioned those. We are doing very well in Russia;recently announced a capacity expansion at our St. Petersburg plant and we are growing in India. With respect to South America, theseare really, really great profits in South America. It'sreally all the same things that I mentioned before: sizing the place right,getting the new products, positioning, and so on. But these are really outsizedreturns. So whereas I said in Ford Europe I thought we would be disappointed ifwe couldn't continue to grow the profits, I think in South Americathis is probably about as good as it gets.

Just one morequestion on Volvo. Mercedes and BMW earn 7%, 8% operating margins. Youmentioned that Volvo was at a loss this quarter. Is there something you canachieve there on profitability?

I think that we cando substantially better than where we are today. We have got a great productline. We need to get the awareness, the consideration out, and work the coststructure like we are doing with the rest of our operations. But we can make alot of improvement.

Your next question comes from Rob Hinchliffe - UBS.

Back to slide 24 and cash flow, just the restructuring cash,and maybe there is an update coming, but going from $7 billion to $5 billion to$6 billion, what drove that $1 billion to $2 billion decline there?

I would say that thebiggest piece was that we were not quite sure what it was going to cost. We areactually in the position of having gotten more people out for less. That justmeans that we were unsure of the estimates at the time that we were going outto raise the financing last year. Maybe we were a little conservative on someof the numbers.

On the subvention payments to Ford Credit, to what degreecould that help Ford Credit's rating? Is that enough, do you think? When do youthink it might be able to start to help, if it does?

I thinkfundamentally, what helps Ford Credit's rating is Ford. If we stay on thisplan, we will become investment-grade. Now will this help a little bit on themargin? We hope so, but that is not the fundamental driver in this case.

You mentioned CapEx, Don, going up '08-'09. About how much,do you figure?

Probably around $7billion per year.

Product costs going up and offsetting some of the costsavings. What does that look like to you in '08? Will cost savings be greaterthan the offsets? Or is this just an ongoing battle that it is going to be hardto get ahead of?

I think it is goingto be an ongoing battle; that is just the way this business is. But I think ofit this way: that the cost reduction piece of it will be about the same ormaybe a little better as we begin to reduce the complexity and become moreglobal in our product development and leverage our assets. Now, what is really going to make the big difference is wewill have two things that will be less “bad” next year. One of them is rawmaterial cost and commodities have really gone up this year and we don't expectto see that kind of an increase next year. Secondly, we had a lot of regulatory increases this year,particularly related to diesel engines in the US,that shouldn't recur next year. So when you put all that together, we expect togo and do a lot better in the aggregate on the net product cost side in '08.

Your next question comes from John Murphy - Merrill Lynch.

Alan, for a long time Ford's stance on Volvo has been that asale is not a possibility. Now that you are going through this strategic reviewthat you seem to have initiated, it sounds like all options are on the table,including potentially a sale. I was just wondering, the change in philosophythere, is that the function of what is going on more at Volvo or more of afunction of what is going on at the Ford parent company?

You bet. I think thatit is more along the lines of continuing to assess our portfolio, where each ofthe brands are and then what is the best thing for near and longer-term valuecreation. Clearly, with what we shared with you about Volvo, we havedecided the most important thing we can do in the near term is improve theirfundamental cost structure. They have got a great product line that is set forthe future. The best thing we can do in the near term is improve the coststructure. So that is what we are going to focus on.

Just following up on the costs that are associated withVolvo here, the overhead costs with Volvo, Jaguar and Land Rover under the PAGumbrella. It sounds like there is almost a reallocation of expense going onhere, and more of the overhead being allocated to Volvo is part of thepressure, and really just prepping the books for the JLR sale. Is thereanything going on there that is out of the ordinary? Were there any overheadcosts that are just unfairly being burdened on Volvo versus that aggregateumbrella here in the short term?

No, we're constantlylooking at our costs; that is an ongoing thing for us. But the amount ofoverhead associated with the PAG is really small. It is in fact inconsequentialin the scheme of things. The issues are the same ones that Alan mentioned, andit is really not at all to do with overhead allocations.

So what is the reasonfor the deterioration of Volvo here in the short term, specifically?

The primary thing that has taken them off the plan has beenexchange rates. Exchange rates have a number of effects, and the most direct isjust the translation on the revenue. But then, the competition gets tougher allthe way around, and the marketing incentives. So it is really important for usto step back in support of this next phase. To, as Alan said, work on the costside; but also to work on the positioning of the brand, work toward a realpremium position. That is going to be our main focus.

Another question on the 7,000 workers that rescinded thebuyouts. I was just wondering if you sort of could conjecture as to why you had7,000 workers rescind the buyouts; and if that has any implications forpotential future buyouts? Because if you're already having 7,000 workers thataccept and rescind, it seems tough that you get a lot more buyouts goingforward.

I don't know exactly what you're referring to. But Imentioned I think 700 people.

Okay, 700.

That does not have a major implication; in fact, it wasactually fairly close to the original estimate that we had in the number ofpeople that might in fact rescind.

Don, what changed or prompted the change in pensionallocations going forward? Will that have any implications for the returnassumptions on the pension plan?

What prompted it wasa whole range of things. But really as Alan mentioned, it was our desire to tryand improve our balance sheet and reduce our risk profile. So what we're tryingto do here is to actually reduce the emphasis on the return. We haven't yetdecided what the effect might be on the return. As you know, only time willtell on that. But what we're really focusing on is to try and reduce thevolatility and the potential risk of unplanned cash contributions. So we are trying to reduce our risk profile, and that isreally what this means here, as we try to improve our balance sheet. That wouldinclude the trust preferred exchange, and the subvention change with FordCredit, and all the other things we have been doing, starting with thefinancing that we did last year.

Your next question comes from Robert Barry - Goldman Sachs.

A question on the commodities and regulatory costs. I thinkyou said on the slide year-to-date commodities was up about $1 billion. Can youquantify the year-to-date increase in the regulatory-related costs?

It's about half thatsize; maybe half, maybe a little more than half. Sometimes it is hard to defineexactly where a regulation cost ends and a feature cost starts. So, it is moreof an amorphous thing than a raw material price increase would be.

In terms of raw mats and these regulatory costs, is themessage that they are going to be up again in '08, but just less of anincrease? Or will they actually be down year over year?

No, I don't expectthem to be down. But the main increase that we saw in '07 -- and it wasn't justus, it was everybody – it was the law change for trucks and for diesel engines.Everybody put added equipment on their trucks and their diesel engines to dothat. The law doesn't change again until 2010. So we don't expect a decrease,and we don't expect the magnitude that we saw this year.

Any ability right nowto dimension the impact or the increase? Half of what it was this year, aquarter?

What I said earlierwas that we would expect, if you look on page 10, looking at next year, thatthe net product costs instead of being unfavorable would be favorable. So itcould have a big impact when you take the commodities and the regulatorytogether with the cost reductions and the fact that we expect to seeimprovements in all those, but mainly on the commodity side and the regulatory.In fact, we are just looking at some sheets here while we were talking. Itwould appear that the regulatory is probably pretty close to the commoditycost. So more than half as much, just about the same.

Then two follow-ups on slide 13, under the volume mix bar,the mix was positive 0.5. Is there anything in particular driving that? Isthere any fleet-related stuff in there? Or is that all in pricing?

There's some fleetthings in there. There was favorable mix in some of our PAG areas; but it ismainly in the USand North America. It includes the Edge and the LincolnMKX and the series and option mix, not having the old Taurus any more. So it isa lot of things.

Finally, on the same slide you've got the manufacturing,engineering, and overhead up together about $700 million. How does that work? Imean, you're reducing headcount hourly and salary. You're reducing capacity.How is it that those items are still going up so much?

Well, those are goingdown. It is the product costs and the warranty that are going up. So when youdon't have brackets, the way we look at things, that is good. When you havebrackets, those are bad. So the products costs are going up, the warranty goesup. Not that our warranty costs are going up, but year-over-year we don't havethe reserve release that we had last year. Then the manufacturing, engineering,and overhead costs are going down by $500 million and $200 million,respectively. Does that help?

Thank you very much, sir. We will be moving on to the mediaportion of our Q&A today. Our first question from the press comes from TomWalsh of Detroit Free Press.

Two questions. One quick on capital expenditures. The reasonthey went down this year or they are going down this year, is that conservingcash for the VEBA perhaps? Or is this a matter of the savings in the newproduct development structure?

It is absolutely thelatter, Tom. The progress that Derrick and the entire team are making on theproductivity of our product development system, great progress.

Second question has to do with market share. You have saidthat you are fairly confident that you have stabilized market share at acertain level. But I am looking at slide 14 and the year-to-year on both fleetand retail are down, 1 point in the third quarter on retail alone, and 0.7 pointfor the first nine months. Year-to-year, the numbers don't look stabilized yet.Elaborate for me a little bit on why you think the market share US numbers havestabilized or are about to stabilize?

The numbers you have on 14 are percents of the total. So youalso have the fleet in there, that kind of camouflages the real essence, andthat is retail over retail. The retail over retail is what we are reallylooking at as we take the fleet down. That has dramatically stabilized throughthis year. So that is the most important metric that we are looking at.

When you saystabilized through this year, you mean those 10% numbers across the 2007?

Well, retail over retail it is around 13%. We don't have iton that chart because those percentages are of the total. But retail overretail is what we are looking to stabilize, because that is the core of ourbusiness. We want to stabilize that around 13%.

And that is about where it is now?

Yes. And that is actually about where it has been runningalmost for the last year, right around 13%. Maybe a little bit less, a littlebit more in some months, but right around the 13%. We were down in the thirdquarter from last year, because last year we had some big incentive programs.This year, as I mentioned earlier, Mark Fields and his team have been verydisciplined about not having big incentive programs at any one time, but tryingto understand what the true demand is, sizing the capacity for it, reducing thecomplexity, and getting the product content right. So we are feelingincreasingly confident that we are on the right track here.

Tom, just a little bit more color to your point. When youjust look at October and year over year the Lincoln brand, the Milan, Mariner,the Mountaineer, up 17% and the Mercury up 25%. You look at that versus theFord, and most of the Ford is the decrease in the fleet sales. You look at allthat together, and that is around the 13% that we are starting to stabilize on.So it is a real testimony to the MKZ and the MKX as well as the new Fordvehicles, the Focus and the Fusion, the Escape and the Edge, complementing ourbigger trucks and SUVs.

Your next question comes from Jere Downs - LouisvilleCourier-Journal.

Looking at slide 15 on your personnel reductions, theforecast for hourly in 2008 is between 55,000 and 60,000. Can you give me alittle insider color on where that extra 4,000 would come from at 55,000? Whatcircumstances would have you go down, and where?

It is really part ofthe Way Forward plan to restructure our operations to the current lower demandand the changing model mix. So that is just part of the plan to improve ourproductivity and reduce our cost structure.

Your next question comes from Tom Krisher – The Associated Press.

I'm still a little bit unclear on Volvo. Alan, when I wasdriving back, you said on the radio that you are not going to sell it. Yet I amnot hearing a definitive statement like that in any of the statements here. Isit fixing it, keeping it short-term, is that accurate?

Our plan now is tonot sell it and to focus on improving especially the cost structure and thepositioning of the brand itself, reflecting their new terrific lineup of carsand trucks, cars and crossovers.

Does that mean keepit forever, then? It is forever a part of Ford?

It is what we havedecided for now is our focus. Like we have talked about, we will continue toreview the portfolio on a periodic basis. But our focus right now is tocontinue to improve their productivity and reduce their cost structure.

The extra 4,000 on the hourly employee reduction, does thatmean there is going to be another round of buyouts and early retirements to getthere?

We will continue toreduce our employment consistent with our restructuring to operate at the lowerdemand over the next few years.

I guess the current around of buyouts is pretty much over;so that would mean you would have to do something to prime the pump to getpeople to go.

We will continue toreduce our employment, consistent with restructuring.

Your next question comes from Mike Spector – The Wall Street Journal.

Just a quick clarification. Are you saying your SAARforecast for '08 is to the downside 16 million for light vehicles?

No, that was totallight and heavy, somewhere in the low 16's. We are not sure. 16.0 million to16.5 million, somewhere in that range.

What about for light?

Probably take 300,000off of that.

So the question is, do you feel that you will be able tostay disciplined on pricing and stay on plan overall if you get a downturn to,say 15.5 million light or so, as some are predicting? And maybe higherregulatory costs if Congress passes CAFE?

Absolutely. The planthat we are on is really working, and that starts with sizing our operations tothe real demand. That is why we are seeing the net pricing go up, because weare making the number of vehicles that people really do want and they really dovalue. So we're going to stay very disciplined on that element of our plan.

Do you still plan toclose all 16 plants as announced in the acceleration of Way Forward?

That is a greatquestion for next week. I don't know whether you were able to hear the firstpart of the call, but we are going to have another conference call next weekfollowing the ratification vote. We look forward to explaining all the detailsof our new agreement with the UAW that not only is fair and respectful for ouremployees, but also allows us to significantly improve our competitivenessgoing forward.

Just to recap, your plan going forward games in somethinglike a 15.5 million light vehicle SAAR and possiblyincreased regulatory scrutiny with CAFE getting passed.

No, not 15.5 million.

Let's take it again.We said somewhere in the 16.0 to 16.5 million.

I'm just talkinglight right now.

Then if you take off, say, 300,000 say 15.7 million, 15.8million, up to 16.2 million, 16.3 million; right around in there. Maybe onlight, you would say plus or minus a couple hundred thousand. We are looking ataround 16 million for next year. That seems to be the way it feels and that iswhat we are planning on.

Having said that,none of us have a crystal ball and we have a lot of things going on in themarketplace. But another key element of our plan is that we are watching thisvery carefully. We are not going to get behind, and we're going to take theactions that we need to take to support the real demand.

Your next question comes from Jeff Bennett - The Dow Jones.

Thanks very much.Could you give a little information on the Ford Motor Credit payments that willbegin next year? What is causing that and about how much would they range?

Well, it is reallynot a Ford Credit payment. The way Ford interacts with Ford Credit now is thatwhen Ford provides an interest rate supplement to Ford Credit, or in effectsubvenes the interest rate, Ford Motor pays Ford Credit along the same timeframe,as the retail contract. So if it is a three-year loan, then Ford would pay FordCredit over that three-year period, just the way the consumer pays Ford Credit.That is how we do it today. Starting January 1, what we're going to do is when there isa contract that is purchased and Ford Motor has provided some subvening of theinterest rate, Ford will pay Ford Credit up front. The existing contracts thatare on the books will continue to run off, and that will conclude by 2011 orso. Does that help?

Alan, just a little bit more insight hopefully into theVolvo brand. What are you of looking at? Would it be more working it as more ofa niche product, kind of like a Toyota Scion, kind of keeping it on its own? Doyou want to kind of mix into your overall Ford presentation?

Our real plan thereis to keep positioning the Volvo brand as a premium brand, which it clearly isnow. In history, it was kind of like a near-premium the way some people wouldthink of it. Clearly with what we have done on the product development, and youlook at their cars and the new crossovers and the utility vehicles, they arereally moving to a premium brand. So consistent with that, we just want toimprove their cost structure going forward, and they are going to be fine, Ithink.

Your next question comes from Rick Popely - The ChicagoTribune.

I just wanted to ask if when you talk about being profitablein 2009, that includes North America?

Yes.

North America will be profitable in 2009?

Yes, our plan is to have North American profitable, and ourentire automotive operations worldwide to also be profitable.

I asked that question because there are some direpredictions not only for the auto industry but just the economy in general,going forward for the next year. As you have said, you continue to remain ontarget for profitability. Can you talk about that a little bit as to how you'regoing to manage that?

I think it is two or three things. The first is that thefundamental of our plan is to size our operations to the real demand. So wewatch the marketplace very carefully. The reason we are making such goodprogress here is that we aggressively restructured our operations to thecurrent softening in the market place and the lower demand. The second piece of it is we have been accelerating thedevelopment of the new cars and utility vehicles and trucks that people reallydo want and value today, especially the smaller and the medium-sized vehicles.The response we're getting from the marketplace is very positive, which allowsus to stabilize our market share and our operations. We will continue to do that going forward, always startingwith our view of what has happened in the marketplace. But that is the reasonwe are making so much progress here and we should continue to make progress ifwe follow this plan.

Your next question comes from Bill Koenig - The BloombergNews.

Based on the slide deck, it looks like you had a reductionof 33,600 interms of US factory workers from both the ACH and Ford North America operationscombined. Something like 37,000 had accepted buyouts in '06. I'm justwondering, is the 33,600 is that belowyour expectations? Were you disappointed in it? Or is that a good number of jobcuts via the buyouts?

Bill, that is justabout on plan. It's a little hard to see, to tie out all the numbers, becausethe buyouts that you're referring to were for the US,for the UAW. These charts are total hourly including our operations in Canadaand Mexico. Butoverall, we're very pleased with the progress that we have made.

Your next question comes from Bryce Hoffman – The DetroitNews.

Gentlemen,congratulations on the progress you are making. Just a little clarification. IfI understood correctly, you said that you saved approximately $0.5 billion as aresult of lower incentives. Is that correct?

Right, year over year. Third quarter this year compared tothird quarter last year. Remember, last year we had the big 0% programs for 72 months that were kind ofacross the industry. There was a big change and there was a lot of disciplineon the part of our team here not to want to do that again.

Do you feel thatyou're going to be able to maintain that discipline if your competitors resortto strong incentives again?

Absolutely. Again,the actions that we're taking to size the operation to the real demand andbringing out the new products, the most important thing that delivers is a matchbetween what the customers want and what we are producing. Over time, we'regoing to continue to, I think, as we have shown in is we're going to get thevalue for these wonderful products because we are not producing too many andhaving to discount them.

Your next question comes from Sarah Webster - The DetroitFree Press.

Good morning. My question has to do with buyouts. You wereasked if you were going to have buyouts, and you didn't really answer. You saidyou are going to continue to reduce your employment. As you know, the workersare voting right now on this. After what happened at GM and Chrysler withlayoff announcements following the ratification, I know they are prettyskittish about that. Is there anything at all more you can say on the subjectof how you're going to reduce your workforce? I mean, these workers are prettynervous that you're going to turn around and do layoffs.

I understandcompletely, Sarah. Again, I know this is not so satisfying for today, but if wecould hold that question till next week, because we're going to continue torespect our employees. The agreement that we have negotiated with the UAW isgoing to significantly improve our competitiveness going forward. We reallylook forward to sharing the details of all of that with you next week afterthey complete their process.

Well, can you say youwon't do layoffs, involuntary layoffs of hourly?

Let's talk about thatnext week, okay?

One more questionabout Volvo. You are repositioning it. I guess I wonder if you could explainhow that fits in with your other brands, such as Lincoln,going forward?

Well, I think thatthey both have unique markets and they are very well positioned. As Volvo hascontinued to move up from near-premium to premium, and clearly our positioningof Lincoln going forward as awonderful, premium brand in between, I think they have very good and distinctmarkets.

Your final question comes from Poornima Gupta - Reuters.

Don, you mentioned the change in pension fund assetallocation. I was just wondering what the size of the fund is?

It is about $45billion for the US.

You also mentioned that the USauto market weakness may persist through the first half of 2009. What are someof the factors behind the forecast? Do you see continued weakness in thehousing market?

Well that would probably be among the main drivers, is thehousing sector. We keep a close eye on that, and oil prices. I think thosewould be the main things.

With that, I wouldlike to turn it back over to Alan for closing comments.

Very good. Thanks, Lillian. Well, thank you all for joiningus today. Clearly, it is exciting. As much as is going on in the world, it's avery exciting time for everybody associated with Ford. Clearly, the resultsthat we shared today give us a lot of confidence that we are moving in a verypositive direction to create an exciting and viable Ford Motor Company goingforward. I would also like to just ask you to consider, have youdriven a Ford lately? If you're not, because the products that we have thisyear and the 2008 models and the new models that are coming out, especiallyclose to home here in North America for next year, arejust terrific. So it's a really good time for everybody to know they've gotgreat consideration with Ford. We hope to see you in a Ford product. With that,thank you very much for your participation today.