Good morning. My name is Dorothy and I will be your conference operator today. At this time, I would like to welcome everyone to the Ford Motor Company Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Ted Cannis, Director of Investor Relations with Ford Motor Company. Please go ahead, sir.

Thanks very much, Dorothy. Good morning and welcome everybody to Ford Motor Company's second quarter 2017 earnings review. Presenting today are Jim Hackett, our President and CEO; and Bob Shanks, our Chief Financial Officer. Also participating are John Lawler, Vice President and Controller; Neil Schloss, Vice President, Corporate Treasurer and CFO of Ford Smart Mobility; and Paul Andonian, Director of Accounting; and Marion Harris, Ford Credit CFO. The results discussed today include some non-GAAP references. These are reconciled to the most comparable U.S. GAAP measures in the appendix. Today's discussion also includes some forward-looking statements about our expectations for future performance. As you know, actual results may vary. As a reminder, copies of the Ford and Ford Credit's second quarter earnings presentations and press releases are available on Ford's investor and media websites. With that, I'd like to turn it over to Jim.

Thank you, Ted, and thank you for joining our call today. You know, success for me today is to start my first call as CEO of Ford Motor Company to assert two important points as a baseline. The first; Ford is a fantastic company with not only an incredible history, but I think a very bright future. And you know, I've had time leading another business in another industry, and during that time, I often traveled to Silicon Valley. It was so frequent that I did learn and understand the culture there. In fact, it's steeped into my thinking, optimism, innovation and questioning the status quo. Out there, being a young company is cool. And in this realm, a company that is 114 days old is a hot item. But what I also learned from all these experiences is that a company that has lasted 114 years is rare, and it doesn't get there by luck, decree, or sticking with the status quo, rather in the face of the facts that fewer than one in five startups succeed, a company that has persisted 114 years, well it had to remake itself many times. When war engulfed the world or when gasoline was 100 times more expensive than when the industry started or when a pickup truck was reimagined to yield one of the largest collective gasoline savings in the car inventory park today. In this way, Ford Motor Company is a jewel in the eyes of those who study long-lived businesses. In the eyes of our customers, who've seen us evolve, trust us and they love the Ford brand. The second point starts with the humble underpinning that Ford can be a much better company. We have an opportunity to be extraordinary in the way we relate to and deliver…

Thanks, Jim, and good morning, everyone. Thank you for joining us today. We're going to start on slide 6 and I'll just cover very briefly other headlines and then we're going to start diving through the results for the balance of the presentation. So as you can see here, the company did grow in the quarter. Our adjusted pre-tax profit combined with a low effective tax rate generated an adjusted earnings per share that was $0.56, that was up 8% from a year ago. We did generate another quarter of Automotive operating cash flow on the positive side, and we did generate a margin of 5.9% on the Automotive business. Let's turn now to slide 7 and look at the key financial summary and I just want to highlight several things here, to bring out a bit more texture in terms of what happened. So, starting and focusing only on the second quarter at the top in terms of wholesales, we generated 1.7 million units in the quarter. That was down 43,000 units. 55,000 of that was Europe and within that, almost all of that was the Fiesta and we'll talk about the impact of that when we get to the European section. The revenue increase was four-tenths, only one-tenth of that was on the Automotive side of the business, the balance was in Financial Services. Going down further to special items pre-tax, $248 million charge. That was related to write-offs that we took associated with the decision to deploy capital away from small cars and specifically the next-generation Focus in both North and South America and as you know, we have announced that we're going to put the next-generation Focus for North America primarily in China with some derivatives also to come later from Europe. Further down from there,…

So with that, we'd like to turn it over to questions for the team here.

Your first question comes from the line of Ryan Brinkman with JPMorgan.

Great. Thanks for taking my question. First question is really on tax. You touched on the drivers of the significant reduction in tax rate this year. Firstly, is there anything you can say more about the change from 30% to 15%, which is pretty big? And secondly, does the lower tax rate this year have the potential to impact future years? And thirdly, is the change more to book taxes, or will there also be an improvement to cash taxes and if so, how material could that benefit be?

Yes. Thanks, Ryan. It's a good question. So, in terms of tax, think about the effect that we're talking about is being 2017, I would think when we get into 2018 we'll move back to a more normal tax rate of around 30%. Obviously, we'll update you on that when we provide the guidance for next year. But, I would see that as something that we're doing this year. So, the other way to think about what's happening, the tax team, who as I said, has just done a great job, they had line of sight to the actions that we're talking about affecting 2017 that we'd be taking in some of the years ahead of us. But, frankly, in anticipation of potential corporate tax reform and again no idea when that happens, but also not knowing what it is, the team recommended that we take these actions that we had planned to do perhaps later in our planning period and pull them into this year, which is what we are doing. And I'm not going to get into specifics of the one action that we took in the quarter, as I said there will be others in the second half of the year, but effectively they're bringing distributions back to the U.S. Those distributions are bringing with them foreign tax credits which we're then recognizing on the balance sheet. So, in terms of the impact on cash taxes, this is a book tax effect, would not expect it to have any near-term impact on cash taxes, but certainly at some point in the future it will, so this is real in terms of both profit and cash, but the cash impact will be later.

Okay, thank you. And then just lastly for me, I thought to ask on Ford Credit, obviously very strong in the quarter. When you first got it to $1.5 billion for full year 2017 in November last year in the absence of knowing anything better, I just sort of assumed $750 million in the first half, $750 million in the back half, you've done $1.1 billion to-date. Can you say anything about the cadence of Ford Credit profits this year in order to help us maybe gauge, how much better than $1.5 billion could the division be tracking for the full year? And then just sticking with Ford Credit, the lease residuals, those tracking better, does that do anything to change your previously communicated outlook that prices would continue to fall through 2019 or some of the actions you're doing on rental cars or something else maybe helping you rethink that?

Yes. So in terms of cadence, we're not providing a specific number in terms of profit for the year. It will be better. Second half will be lower than the first half. So, I certainly wouldn't take $1.1 billion times 2. That is not happening. But it will be better than the $1.5 billion. And to the question that you had around, how are we thinking about – and let's not talk about auction values but more residual values as a percent of sales price, because we actually expect over time that those will rise and we want to kind of focus on the percentage, if you will, residual values as a percent of that. But we are still expecting, as I said, it's about 6% year-over-year, which would suggest a pretty sharper decline later this year in order to land in that spot. So, we'll have to wait and see if that happens. Frankly, the team just gave me a report yesterday, the latest weekly report, and things are still holding up well. So, we haven't seen the signs yet of anything happening. We've certainly heard that we can expect to see some declines coming from the next ALG update. So we'll have to work our way through that. But that's what we're kind of providing for in that guidance. In terms of looking at 2018 and 2019, nothing has changed in terms of our expectations. We're still expecting that residual values as a percent of vehicle price will be declining and we're building that into all of the new business that we're writing.

Very helpful. Thank you.

Your next question comes from the line of Brian Johnson with Barclays.

Yes. Just want to get underneath the kind of puts and takes and revisions to the outlook. It looks like with the tax credit benefit, you will be taking that it appears that the midpoint of pre-tax seems to be as mentioned coming down from the roughly $9 billion that you talked about. Can you, A, confirm that and, B, with the regions performing a little bit better this quarter, where is that op and with certainly Ford Credit now poised to contribute more? Where do you sense that operating weakness is likely to come from?

Yes. So, first of all, you shouldn't assume that our own point of view in terms of where the business is at the midpoint. But you are right. I mean you can calculate and figure out what the midpoint is and it would be further below the prior guidance of $9 billion and just a bit below which is where the top end is. But, please don't assume that's necessarily where we are in terms of our own single point estimate. But to the point you are raising, we are looking at the business both in terms of market factors and cost performance. We are trying to provide some recognition of the fact that we don't have control over everything and so there's two I would highlight. One is the commodity cost, which as I said, will be up based on what we think right now about $1.2 billion on a year-over-year basis. By the way, they were favorable last year by $900 million, so you can see how they can swing. The exchange is another factor that obviously will be what it's going to be and then frankly, the other one is around warranty expense and the potential for recalls. We don't forecast recalls. In fact we don't know, I personally don't know about recalls or others until the team has done the work and the data supports an action and then we move and we move very, very quickly. But as you are very well aware we have seen, some recalls that have had material financial impact over the last number of quarters, and so this provides us a little bit of space for that as well. But I would add, Brian, that a couple of things since the first quarter guidance that has taken place, actually three things, very specifically that we've accommodated in this range, one is higher incentives across all regions of the world, not really large in any one region, but when you add them up, it's a factor. The second is higher warranty expense already in North America and that's related to coverages. So, not recalls, but coverages, normal 36 months, 36,000 miles that sort of thing. Also something, some related to our extended warranty that we provide on some of our components. And then the last, which is an offset, which is what you raised is a favorable view of what Ford Credit is going to bring to the business. So those three together, in an absolute sense, will take you a bit lower than $9 billion, but contained within the upper end of the guidance. The rest of it is really a risk assessment.

And now a question for Jim. I know you're still in the midst of this 600-day fitness assessment, but one thing that jumps out at us is the gap in North American margins between Ford and GM, which is now running around 300 basis points. What's your observations of that? Ford still historically has traded at premium to GM, primarily thinking that the brand equity was stronger, that brands were better positioned. But to the extent that is, it's certainly not showing up in the margins in North America. So wondering, if you have some points of view on that and how just preliminary that might be addressed at the end of the 100 days?

Well, I think, Brian, it fits the early comments I made about fitness that, that notion means, you're scanning for competitive improvements. People coming at you that you don't expect, as we start talking about the future, we'll be talking about competitors that are outside our industry. So that kind of thing gets my attention. I can understand that in ways with the SUV segment being so strong and our franchise being really strong in that same area, and this kind of perspective that you're bringing up is something that we talk about. So I can just confirm it's the kind of thing that doesn't go over the top of our head. It's not something at all that I'm worried about addressing and I also have great optimism that when we talk to you about how we're going to address that, there is big opportunity there. Just for all the listeners and in regard here, we changed the organization on May 22. So, there were 19 direct reports in the last administration, I have 8 and I'm an executive team that, the speed in which they can address something like what you just talked about, there's a big improvement. You wouldn't know that based on the data which you are looking at right now, but that's the promise that hope to prove to you.

Hey, Brian, it's Bob. The only thing that I would add and again it's not to denigrate GM's performance because I think what they're doing is quite impressive I think. But we do have to and you guys recognize this as well and they do as well, there has been a lot of stock build. So, I think when you want to compare margins and that type of thing, you really have got to neutralize that effect on both sides. And if you look at our business in the quarter, we actually had a stock decline in the quarter in the U.S., and in North America, we had a very small stock – favorable stock change. That was not the U.S. which is where high margins are. So that's the only caveat I would put as, on an apples to apples basis probably gap isn't quite as large as what you said.

Okay. And just final question around capital, are you open to sort of bold moves around capital consumption ranging, whether it's from investing in product lines all the way to spinning out or joint venturing major parts of the business that consume big chunks of cash?

Yeah, I mean you called it bold, I think it's just part of the fitness cadence and discipline that I'm really trying to stress. I mean this is one of the most important things the leadership can do, is making choices in a way that really preserves capital, gets the kind of returns that you would expect, so of course all of that is in the air up for grabs.

Okay. Thanks.

Your next question comes from the line of Rod Lache with Deutsche Bank.

Good morning, everybody. Jim, I'd like to just ask a couple more questions about the things that you are assessing in the first 100 days. First of all, just on this innovation question, what do you think can change to accelerate the pace of innovation and the clock speed at a company like Ford and to make the company more competitive in terms of speed and risk-taking with some of the tech companies that you've had quite a bit of exposure to?

Rod, this is the area that I probably have the most confidence and I'm humble about what I'm about to say to you, because I have to prove it here. But surprisingly in a company like Ford, all the talent's here, all the capability is here, so I got to confirm that with you. It's what happened in business history, there was a little bit of a shift in terms of the way that you understand the nature of the way people use products. You marry that with really rigorous development processes and you have success. And so, the inference is that that frontend part, the way we understand use, think about that as building more value in products, but there is also a reductive opportunity, there's stuff that people don't care about in vehicles that we shouldn't have there. And in the course of doing that, I want to confirm that this is one of the pleasant surprises I've had when I got closer to Ford from just being on the board, is they have mastery in key systems like the financial systems as an example. They have mastery in the ability to engineer product to market. The quality metrics that you're hearing about and there is an ongoing report of quality. There is definitely change there. So, I want to leverage what got better over the last, say, seven or eight years in those areas and marry them with some of the innovation techniques that I won't go on about today, I want to share all of that, that I understand. And the way you walk away from that discussion is you realize that the people all of a sudden are saying, I like the Ford products better and they like them a lot now. They are really popular, Mustang and F-150, but I see opportunity in every area where we can be better.

So, just to understand that a little bit better, is the management team and you specifically dissatisfied with what you see at this point in terms of the clock speed or the changes that you're seeing from an innovation perspective?

Well, this is a kind of question that could come up a few times a day. So, let me step back and tell you one of the first things we did going from 19 to 8, is we addressed the, what I call, the point of view ownership. Think of that as when you have a lot of things that are triangulating for attention and clarity. These are big decisions. But the simple notion that somebody owns that point of view is an empowering and freeing stance. So, we went through exercises together as a team to clear that up and we're already seeing the effect. So, we're speeding up decision-making. We're speeding up the way that choices are clarified. A neat consequence from that, that was a word that Alan used to use, wasn't it, neat.

Neat and cool.

Neat and cool. So, a neat consequence of that is we've been able to free up time on the executives' calendars. I just did the math last night. It's about 30 minutes a day that was taken off of their calendars that were corporate kind of requirements. So, when you work the hours these folks do and how hard they are working all over the world, that's found money. And then that translates in ways. The body language is now translating down to the teams that work for these folks. So, again, if you're following me around, we got some early momentum here. It's too early to report in this quarterly call to you, but you asked the question, how do I see that infiltrating? And that is what you pick up in startup companies, in tech companies. They haven't grown to the size of Ford. So, they didn't have that kind of hierarchy that I inherited. So, they have some advantages in that regard that we don't have to cede that to anybody else. We can bring those in and that's what we've begun to do.

Great. Thank you. And just, lastly, a question on how you're thinking about capital allocation and the portfolio of businesses and products. One of the biggest paybacks that we've seen over time in the industry is actually when the industry exits segments that have been – the companies have been involved with maybe just – maybe based on tradition more than anything else. But they're obviously challenging segments and you can think about regions that have been challenging for many years and maybe so for a long time. Is this reassessment that you're looking at also that broad that you're questioning regions or segments, markets that Ford is currently in?

Yes. And I don't want to dismiss your question with this response. I mean you've got to believe the capability of the folks running the company, including myself. Don't fall asleep on that question. I mean there's other forces that tend to put that in a vice and hold it. And that's what you are accurate about. You have to break that hold to say, what's causing us to hang in there. And every time, if you look back with me that we hung in a market was because we actually took actions to improve and maybe it didn't work. So I think the new reality that I can kind of confirm to you is that we really have to ask ourselves what do we have to believe to get to the kind of returns that we expect and you expect. And if we can't answer that, then we can't be there. That's making the choice when you hear us talk about playing to win and where to play, that is what that code means, is that you are clarifying where you're going to put capital. You've seen decisions from us already in the short 60-plus days that the new teams come together and the decision to put the Focus in China is an example of that. We saved a bunch of money doing that and there is other things like that that will be forthcoming.

Great. Thank you.

Your next question comes from the line of John Murphy with Bank of America.

Good morning, guys.

Good morning, John.

Maybe just a first question here, Bob, on the guidance, and just doing some real dumb guy's math here. I mean it looks like, at the high end of the range which you're relatively more endorsing than the low end, you do about $4 billion in pre-tax in the second half of the year roughly. And your guidance range though does kind of imply a pre-tax range of almost $1 billion. So, that $1 billion is against that $4 billion in the second half of the year. I am just curious, I mean you kind of highlighted these three factors, but I mean is there something else going on or is it just a big recall maybe around Takata that you think might create incremental expense in the second half of the year because it's just a big relative range to that remainder of the year?

Yeah. I agree with you. I think it is in part around some of the – if I go back and look at the last year-and-a-half in particular, we've had a number of material recalls that, again, for the reasons that I mentioned, don't know about them and then they happen, and not in the guidance because we didn't know about them. So, what we're trying to protect for is the possibility of something like that. Again, nothing that obviously has been acted upon because otherwise by definition we would have done it. Takata is actually not relevant in that conversation, I think, at least from our point of view, because we actually have gone back to the government and indicated that there's no facts or circumstances that would support us in doing something. So, we are having that conversation with them. But it's really more around risk assessment of that, if something like that happening. Also, just looking at a historical experience in terms of market factors, what could happen in terms of market factors from this point forward, commodities out there. They've started to actually get a little bit better from the first quarter, but that's a concern, exchange and other. So it's really more around risk assessment. That's the way I would think about it and not that there's something going on. There's something that we have in mind. I think it is fair to say that at the moment we're more towards the upper part of that range, but we're just trying to protect for the potentiality of something along the lines that you talked about occurring. That's it.

Okay. That's very helpful.

What I would expect when we get to the third quarter obviously the range will be a lot less. And we'll narrow it down and have a better feel for ultimately where we're coming out for obvious reasons, but this is where we are today.

Okay. That's very helpful. And then just a second question on your mix being positive $310 million in the quarter, I think you highlighted, goes far beyond just segment shift, but there is also a shift we see in vehicle lines as you are selling – up-selling the consumer. I'm just curious how much of that do you think is sticky over time, how much of that is very Ford specific? And are you getting into a higher set of customers that are willing to pay you sort of mass market, luxury sort of premium kind of prices that will stick around for a while?

Well, this is something that we've had a lot of success in North America. It's a big part of the story here both around product mix, but also the derivative mix. Stephen Odell and then Jim Farley in Europe made that a central part of the transformation plan there and that's been extremely successful. And Jim's still pushing the team there, but everywhere around the world for the dollars to be mined from that approach. So, I wouldn't say – and I should mention also China. We've also picked up over time a lot of good news there from bringing in the Edge, the Taurus. We're taking the same derivative strategy in China too. So, it's not just a single market that we're taking that approach because we know it works and successful and customers actually love those types of products. What I would say though just to condition you, when we look at the first half, we've picked up quite a bit of good news on mix on a year-over-year basis, about $700 million. I don't see that happening in the second half. And the second half is probably a bit flat to even maybe slightly negative. And that's because on some of the big contributors of the more recent improvements and particularly Super Duty we start lapping ourselves, in terms of when the product came in and the derivatives in the high – the high derivatives at the beginning of the launch, et cetera. I think Fiesta will give us an opportunity in Europe. So I think that's one that we should look out for, because I would expect that to follow. But I do believe if we take it out longer than just the half, certainly Jim's view is that, there is gold to be mined in the hills and he is going to keep pushing us.

And I would add, Bob, that coming in new, when I was on the board, we got to tour that plant, that was building the new F-150 with the aluminum underpinnings. And when you drive that vehicle and you know, it's handling characteristics, and I made reference to its contribution in this last year to MPG improvement. It is the significant factor that's improved our goal, our march towards a cycle plan more than any other vehicle in anybody's inventory. But where I want to go is, when I drove that car, that vehicle for the first time, and the kind of feeling I had, I believe the word spreads in this kind of industry, and here we have a product that's now starting to be understood and very popular. And then, as I mentioned in my comments, the refresh is coming, and as Bob's conditioning you, we know we've sold a lot of these vehicles, but we believe there's still a lot to be had, and that's what's helping that transaction price go up.

And maybe just – I apologize, maybe just a follow-up on that. I mean the Expedition and Navigator launching next year. I mean, if you make up some ground on GM and Ford, that might be a $1 billion or $2 billion opportunity. I mean, is that also – I mean off the back of the F-150 platform, and similarly fuel efficient, is there a real big opportunity here when the Expedition and Navigator launch next year or actually really hit dealerships next year?

Yes, we definitely see the Expedition and Navigator as an opportunity both in terms of volume and certainly in terms of price, transaction price, mix and so forth. That's a really big opportunity. That's why I wanted to make sure that you understood. Even the old one was quite profitable, right?

Yes.

So, I wanted to make sure that when I was talking about the third quarter, you understood, we're basically not wholesaling hardly any of those old or new in the quarter, and then we'll start filling the pipeline in the fourth quarter and then of course it really will pick off and take off in 2018.

And this is why I talk about the handling of those vehicles in my early comments. You're going to have to drive one to feel what I'm talking about, but there's a definite marked improvement, I think competitively. It's going to be really interesting how they react to that.

Looking forward to it. Thank you very much.

Your next question comes from the line of David Tamberrino from Goldman Sachs. David Tamberrino - Goldman Sachs & Co.: Good morning and thank you for taking our questions. First, I want to just stick with the U.S. market. I think you brought down your assumptions from around 17.8 million to 17.5 million total SAAR, so about 17.2 million light. Wondering how you feel about the market going forward from 2017 into 2018 and 2019? Are we in a plateau mode in the 17 million, should it grind lower into the 16 million? That's kind of point one. And then on the back of that, Jim, as you think about North America cycle peaking and coming down, what type of levers do you expect to pull to maintain profitability? Are you going to be quick to pull out production, is it incentives, do you drive back more sales to the daily rental channel? How are you thinking about navigating what looks like a cycle peak and decline from there last year and at least in North America?

Okay, Dave. Let me take those and see if then Jim would like to comment. So in terms of industry, we don't have it in this deck, but we had indicated in our prior guidance, and I think it was 17.7 million, the prior guidance, that we would see a further decline in 2018. So I think the way to think about it – I know we're all kind of struggling with this to figure it out, because I see what you guys are forecasting too. Our view is that what, however, you wanted to describe it, an eroding plateau, I've seen that, or however you want to characterize it, very strong sales, we don't see anything in terms of the economy, the health of the consumer, housing, oil, the oil production is back up and that's had an impact on trucks for example, that would suggest that over the next two – let's say two years, that there's any kind of significant collapse or dramatic change. We do think it's going to decline. We think it will be a soft gradual decline. What we're seeing this year seem to be more on the retail side, probably, or fleet side related to what's happening with auction values, a lot of that with rental, but that seems to be the effect this year, we'll have to just wait and see when we go into the next two years or so, what does happen. That's our view and what we'll do is, as we always do, we update this monthly and we'll share it with you kind of real time, as we have the chance to get together. But that's our view, it's declining, but it's still going to be very strong.

In North America, Bob, the belief is, David, that all the work we're doing for new products, these are going to be forthcoming, so there's an improvement in the mix of products because of what we're inventing. We see opportunities, as I mentioned a minute ago, in the F-Series with the refresh. You've already acknowledged the Expedition and the Navigator, Transit as well. This is a product that has very high share and has a big advantage in terms of people love what it can do and so we're investing there as well, so think of the North American product mix isn't sitting still.

The other thing that I would add in terms of things that we would think about as the industry softens a bit. To me, there is no better time than to follow the principles of a disciplined approach to the business. You have got to be even more disciplined. You've got to be anticipating a bit more where the industry is going, where you see changes. You got to act superfast. And if anything what, and I know this is Jim Farley's mindset and Joe as well. The other thing that we should do, you don't wait for it to happen. You've got to start kind of leaning yourself down in the areas that you know will be affected by the downturn on the way towards what will be downturn, so for example stocks. We do have targets on stocks. But can we grind that a little bit lower than the target stocks, and can we kind of glide our way down a bit, so that when the sharper downturn occurs that we're in better shape once it starts.

And in earlier calls, Bob, I remember you were establishing that we were managing the days in inventory. Let's be candid, the world thought, oh, there's something amiss here, but as this quarter now and the industry plays out, we're real happy with our position right now in the inventories. We were managing that very well. David Tamberrino - Goldman Sachs & Co.: Understood. I think that was clear. And on the go-forward, as we think about new company kind of three pillars of autos that's changing; mobility, electric vehicles, autonomous vehicles, should we be expecting or naturally do we expect spend to continue to increase from here on all three of those? I mean is that the way that we're – or you're going to be approaching the business and somewhat expediting, some of the things that were going on at Ford Smart Mobility at a total company level and getting further into that electric vehicle platforms that were going to come out for 2020, further into the autonomous vehicle development, further into mobility?

Yes, are you – when you are asking the question, Joe, are you thinking about incremental, are you asking me the question, can we get our total fitness to absorb – oh, excuse me, David, sorry. David Tamberrino - Goldman Sachs & Co.: Well, it's a mixture of both, right, because the spend, seems like it should increase to bring forward the clock speed if you will or pull forward some of this...

Yes. David Tamberrino - Goldman Sachs & Co.: But then against the backdrop of a declining North America market, how should we think about overall spend?

Yes, so, I'm going to let Bob tell you the way we're planning that in the current numbers. But I'll just give you the way my body language is. I want to question that you have to sit here and hear us say that, the core business as we knew it, all the spending there is as fit as it needed to be and everything new has to be incremental. I haven't bought that yet.

And the only thing I would add, David, is that, this year, we expect in terms of CapEx, and we use that as the surrogate for what do you spend, because there is engineering and other things, but CapEx of about $7 billion. When you look at our 10-Q, which will come out later today, we had guided over the next five years to – previously to $8 billion to $9 billion. I think we're going to take that down to about $8 billion. So, I at the moment, would see us kind of moving up to that level, after this year, not necessarily all next year, but we'll have to wait and see where that pans out, but it's certainly, that's about the level that we see the business running in terms of CapEx. And one other thing that's kind of interesting in that regard, a lot of the things that we'll do in some of the mobility spaces, digital services are not capital intensive, so we have to remember that. Also, if you think about the actions that we took around the Focus for North America, we freed up $1 billion, so part of this is finding smarter ways, which is what Jim was talking on to deploy and allocate our capital, not just spend more. David Tamberrino - Goldman Sachs & Co.: Okay. And finally just in China, can you just talk to what you're seeing from a price down perspective, has it accelerated since the first quarter update? And exiting the second quarter, how do you feel your inventories are, given slower sales pace that we saw at least in the second quarter?

The overall industry pricing accelerated in the second quarter, which I think we had expected. I think we're still on track towards, I want to say, 5% for the full year. And that seems to be pretty much in line with what we're experiencing ourselves. So, I think that's – that seems to be the path that we are on. We took a lot of actions in the second quarter to get our stocks in shape, because of the issues – the sales performance issues and also the lower industry that we talked about in the first quarter of the year. So, I think we are in pretty good shape right now. And then going back to the earlier question that we had – that you gave us around what do you do, I mean, Jim has been really fast with Joe as soon as we see sales miss or anything in the external environment that suggests that we need to take out stock we're doing it ASAP. David Tamberrino - Goldman Sachs & Co.: Understood. Thank you for the time.

Your next question comes from the line of Joseph Spak with RBC.

Thanks for the time. A question for Jim. So one of the things you've mentioned is looking at capital. It's come up a couple of times, and making sure that's used efficiently. So along those lines, and as the industry migrates more towards xEV technology, well, first, do you have a sense of how much of your current PP&E is related to internal combustion engines? And I guess more importantly, what percent of that equipment do you think is flexible enough to be repurposed? And as you make new capital decisions, are those purchases being made with a certain level of flexibility in mind?

I would say yes, yes, yes. I mean, I don't know that I'm going to tell you some of the internal strategic things about that, but remember, Ford's ability to produce an ICE engine and the kind of engineering to bring that to the level of quality that I think is world class is the same kind of talent that will allow us to bring these new Powertrains. And they themselves can carry the day I believe in the future with robust designs and better business models and better digital services. I mean, there is more to the quest for profit than just what's it cost us to build the vehicle. As we can stare at other competitors that are doing this and I am not worried about the embedded cost, let me just state this for the record, I am not worried about the sunk cost or the fixed cost we have in the old historical technologies, frustrating us about thinking of the future. It really doesn't matter. I mean, we're going to do what we got to do to make the company really successful and meet the kind of requirements that we have to meet and win the way you hear me talking about. And I don't think about how many factories I have building gasoline engines. Now, I know that if I flip that, that you can ask – you're asking a really smart question, which is, can you leverage capabilities at Ford? And absolutely, we can. That's something that you will expect. And you'll go what's an example right now? Just think of the early investment we made in Chariot, that's a Transit platform that we know a lot about, as we build the ride-hailing and ride-sharing service ideas, and we're learning about users in those kinds of experiences that can backward integrate in the way people just experience the Transit when they're not sharing it. So, there's lots of synergies in the future back to what we've already understood about our business.

Okay. Thanks. Look forward to hearing more about those opportunities.

Your next question comes from the line of Itay Michaeli with Citi. Your line is open.

Thanks. Good morning. Just maybe shifting gears to South America, it does look, it looked like you've narrowed your losses a bit year-to-date on plan with your guidance. But I was hoping you could give us a little bit of a better view of how you are thinking about the second half in South America. Where your breakeven levels there are? And what the path there is to get back to profitability for Ford in that region?

Thanks, Itay. Good morning. The path is really going to be around what I touched on, when we were going through the section, which is the recovery of the industry firstly and the consumers. So, when we look at the second half of the year, we expect to see substantially better results on a year-over-year basis than what we saw in the first half of the year. And much of that's going to be driven on the back of the industry, a little bit of mix, but also some pricing without too much impact of exchange based on how we see the market right now. And cost being very, very well controlled with some inflation getting through, but very well controlled. As we move forward, I think and as momentum continues in the economic recovery, again the leverage effect, I think it's going to really flow through quite quickly. And then what the team also is working on of course is product. We need to make sure that we've got a very robust and exciting product portfolio and in fact later this year, we're going to be launching the EcoSport, the mid-cycle change on that which has been a very successful product there. And we'll also have coming a mid-cycle change on the Ka, which is in the highest volume segment in the region. So, those are the things that I think we're going to have to build on for product portfolio and bring more customers into the showrooms from that point of view and our team is working on that.

That's very helpful. And then maybe a follow-up for Jim. As you go through your 100-day review, can you talk a little bit more about the revenue opportunities that you are looking at? And also, maybe how Ford's investments in Big Data kind of play into some of the opportunities both within revenue and fitness that you described on slide 3?

Well, you led me to that answer in the knowledgeable way that our GDIA helps us – this is an important thing that was invested in that's really been worth its value. So it helps us understand demand in a lot more granular way, it helps us understand pricing, it's going to help us understand pricing even better. So, right now, we're looking as I mentioned in my comments, the relationship between mix and pricing is where the revenue opportunities are. That's probably as much as I want to share about it, because it's competitive, but there is opportunity there.

And maybe I can just give you an example of what Jim was talking about, Itay. For example, GDIA for quite some time – we're probably most progressed in the U.S. in terms of their ability to help guide us in terms of how we play volume versus mix versus incentives versus types of incentives, the effectiveness of the marketing, the fixed marketing, the advertising sales promotion, so we've got tremendously strong data and starting to move to the point where we can actually understand individual customers, not just the broader market, but individual customers. But one of the good examples and this plays a bit to what we've seen unfold across the industry, but perhaps more so at Ford, which is around the cars. As we've looked at the data, and we've looked at our own data and we've looked at the competitors, there's just not much elasticity on the cars. So, we can put more variable on that. It's not going to do anything other than we spend more variable. So, that has enabled us to kind of pull back a bit. And in fact I think in the second quarter, we pulled back on our incentives in an absolute sense, much less than increase for the industry on cars, if I remember correctly. And we've been able to take those funds, and we have been able to allocate them to other segments and specific vehicle lines combined with an aligned advertising sales promotion approach, but also Tier 2 marketing by the dealers and Tier 3, to be very aligned and very powerful around where we know the most elasticity is, and really drive hard. So, that I think has saved us incentives and it's probably given us some off the mix effect that we've had, it's also I think given us a clear view about the real underlying strength of the car business in general, but ours specifically.

That's very helpful. Thanks so much for all that detail.

Thank you. We will take one more analyst and then we will switch to the news media. Your next question comes from the line of James Albertine from Consumer Edge Research.

Hi. Thanks for taking my question. This is Derek Glynn on for Jamie. Jim, in your view, can the success of emerging opportunities be complementary to the success of the core business or is this inversely related? And similarly, recognizing it's still early days since the investment in Argo AI, what are your views on the strategic vision for that entity and the role it could play going forward? Thanks.

Well, the important secret in this, Derek, is that humans are in both of those models. People use the products in the historic understanding of our industry and that's our target obviously in the future. Even though and I am being a little facetious, but even though there is robots in the future, right, as you're targeting about with Argo AI, so the robots are only going to be as effective as how they serve the humans. This is a distinct position that I am taking and I think there's going to be a difference in the way Ford thinks about it. So, Bill Ford and I had a really intimate discussion about this when I started in the board. Then later, which is – the history of the company is evolving itself over this long-lived life and not thinking about that it's in a regressive way unable to leave the last phase to the new. I mean, we just got to do what we have to do to win and be successful in the future. What tends to happen, you are hearing me preach here a little bit, is we over-romanticize that future. We over-dramatize. Bill Gates used to say you overestimate the arrival and you underestimate the impact of these technologies. So, we have to get ready for how disruptive they are, but they probably aren't as soon as everybody is writing about them. We're ready though, we're going to be ready. And so, Argo was an investment in that area. John Casesa, our Head of Strategy, helped put this together and it was a really innovative idea, because to get that kind of talent inside Ford, the configuration of the entity in Pittsburgh allows us to have them be us and them be them. They can be both together. It probably wasn't known as deeply as you can read about today, is the deep learning ,is a phase of artificial intelligence that's recent. It's only three years really in its awareness. And deep learning is kind of the special pixie dust the way these things are going to really perform. The ability to do that is what we're targeting with Argo AI to bring that capability into Ford. There's very few firms in the world creating what we're talking about that have this capability. And so, that promise is something that we have to come and show you, but it's situating us really well to be ahead in that game eventually. We're not there yet. I wouldn't say we're number one, but we're at the top of the people working on this technology. As we go into the media discussions, someone is going to ask me to calibrate that, but you just – you got to trust the way machine learning has evolved. There are differences. There is kind of elite kind of players in it and then others that are kind of good at it. We're going to be in that elite level with this capability.

Okay. Thanks very much. That's very helpful.

We will now take questions from the news media. Your first question comes from the line of Dee-Ann Durbin with The Associated Press.

Thank you for taking the call. Bob, a quick one. What's the update on the buyout offers? Are you getting what you need and if you don't get what you need, do you then consider layoffs? And, Jim, another quick one. Just your take on Ford stock price and what it's going to take to move the needle to kind of get past the cycle fears that investors just can't seem to get over? Thanks.

Okay. Thanks, Dee-Ann. So, on the first one, based on the latest that I have seen, it's progressing well. I think they have until sometime later this month, someone's saying today. Today? To self-select. So we'll have to see what the final numbers are, but I've been told it's going well. Just for the analysts on the call, we will reflect any separation cost associated with that in the third quarter as a special item. Don't know what that number is, but we'll report it in the third quarter.

And regarding, Dee-Ann, the share price, there is no CEO in the world that doesn't understand that that currency is not only how they are compensated, their teams are compensated, but is the scorecard for how well things are going. But the way I think about that, it's a consequence. It's not a leading indicator. So this share price today does not reflect the team's activities that I believe we're going to embrace and deliver to you. So that has to happen with dispatch and more importantly what Bob and I talk about, Bill and I talk about is reliability where you expect things from us and that we build trust in the way we create value. I've been in the business, been around CEOs that have that kind of command and so I long for that and that's my pitch that the share price over time is going to reflect what we're able to get done and we plan on getting a lot done.

Thank you.

Your next question comes from the line of Brent Snavely with Detroit Free Press.

Hi. Thanks for taking the question here. I'm wondering, as the industry goes through this very big trend of car sales declining, as SUV, crossover, and pickup sales increase, if your review of capital allocation – I mean, if you're looking at car lines and if there are cars in the U.S. get risk of being eliminated as you add SUV models?

Well, I'm looking to Bob because – and as I came into the job, I knew we were in the middle of that. So I want to confirm we do. That is one of the leadership responsibilities. And there's been some decisions that have been in the air, so to speak, but I'm going to let you...

Yes. I think, Brent, what you're talking about is consumers are moving away from passenger cars into utilities and trucks. They've been doing that for quite a long time. They've been doing that not just here, but in all the major markets of the world. And there is no sign that trend is going to continue. So we will be responding to what the customers want. That's around the – the guidance we have already provided is around investing more in utilities and investing more in trucks. But in some markets and for some reasons, cars will continue to be important. We're just going to be very thoughtful about the amount of investment that we make there and make sure that it gives us an appropriate return. So I think two examples that demonstrate that is the decision around the Focus, so we will still provide a Focus to customers in North America. But we're going to do that in a way that's very capital efficient and saved us $1 billion versus what we had expected. And we'll do so in a way that gives us a better return than what we would have done if we've just continued on the path that we had been on. And we're going to look at all the individual vehicle lines with a very critical lens as we go forward, because we've got to make a return on that investment. Another example is in Europe, the B-MAX. The B-MAX is a small multi-utility vehicle in a segment that's declining and we're going to be discontinuing that. That's going to be replaced by the EcoSport to be built in the Craiova plant, which is going to be much higher volume and it's exactly what consumers want. It's a very big growing segment. So we're going to do that type of activity right across the portfolio everywhere in the world in response to what consumers want and our desire to get an appropriate return.

And, Brent, to add, you know the utility mix in the company is high. That continues and we're adding, of course, the Ranger and the Bronco coming. There is other ideas that are coming in that category. For those who wonder, are you worried about over time that as fuel, let's say, starts to shift again or there is a different conscience about utilities, that's why Ford's investment in these aluminum understructures was so prescient. That's why our ability to put hybrid and other kind of Powertrains is going to be really important. And so let's just make an investment in this category that's been very profitable for us and future proof it a little bit because of the way we're thinking about their performance over time.

Is there any way you can speed up getting Ranger and Bronco to the market and EcoSport or is that schedule sort of baked in at this point?

Well, you've to come and help me twist arms. I'd take it as soon as I can. But the rigor of getting this done right, I think, is the thing I'll lean into. We got to do it the right way. So it's getting all the attention that it deserves to get here at the right price, right time kind of equation.

Okay. Thanks.

Your next question comes from the line of Christiaan Hetzner with Automotive News.

Yes. Many thanks for taking my question. I need just one to ask really quickly. What your views were about Europe in particular, in terms of the number of brands competing, the complexity in the market, the role of diesel, upcoming CO2 emissions targets and, of course, Brexit. How do you view the region? Is it something that over the long-term remains attractive for you? And, secondly, very quickly about the Fiesta launch. How important is the Brexit effect in that, given that that is the most important market – the most important car in that market for Ford? Thank you.

Well, let me start and then I'll give it to Bob to add precision, because this is something I think about a lot. I think, every – by the way, every CEO that competes in Europe in all industries have stepped back. The industry that I was in before this had similar kinds of challenge to compete there. What's top of mind for me is how strong the Ford brand is there. So when you witness other things that have happened in our industry, the Ford brand is highly regarded. I've learned the Mustang, for example, I think, last year, Joe was number one sales in Europe, I mean – and that was a decision by us to take that to market and look how well it did. So, there is reinforcement over and over again. Jim Farley, who just came to head up all the markets for us, was just in-charge of that for the last three years. And we're able to make that profitable. And we can – now Brexit was a twist in that. I don't think any of us saw that I mean, if you were thinking of predictive kind of exercises, the kind of things we're going right now. We did not sit as a management team and say, hey, Brexit's going to happen and therefore your footprint's going to be under pressure. But we're business people. So, we're accepting that and we're deliberately now thinking about how to play to win there. But I want you to know, we're in Europe. I mean, Ford can be really successful there. We've got great response to the Fiesta. I'll let Bob tell you about that. And so, I'm bullish on it, but that we've got to address the issues that come from Brexit. And the mobility play, as it had all this promise, and it means lots of things to different people has a real attraction in Europe. There's some things there that we see them as early adopters of that we're trying to leverage. So, I want to leave the message that Europe is a place we're going to be.

So, the only thing I would add is that we do see opportunity for the Fiesta as I touched on earlier. It's our highest volume product. It's the fabulous product that we're bringing to the market. And clearly, it's going to give us an opportunity in 2018 and in the latter part of this year. I think a couple of other points to think about, I mean PSA and even our own performance has demonstrated that one can make profits in Europe, now what we have to do is make better returns in Europe and certainly we're very focused on that, although to be frank, probably the type of return that you get in Europe, won't be what it is in the United States because of the structure of the market and competitiveness, the products and so forth. But we do believe that we can get an appropriate return in Europe. The other point I would make is around Russia. There is Europe and there is Russia, and Russia clearly, we believe has the opportunity to first grow, to potentially be the largest individual market within Europe but also to give us very good returns. Although recognizing that will be more cyclical than probably the underlying European business itself. So we still feel a lot of excitement about Europe. We're very committed to Europe. We think we can get the appropriate returns in Europe. We are all in and we are working to improve the business in response to the curveball that Jim just mentioned around Brexit.

Thank you very much.

Your next question comes from the line of Matthew DeBord with Business Insider.

Good morning. Two quick questions for Jim. First is Jim, if you could just give us possibly a specific example the Ford product in which you're applying some of the systemic design thinking that you spoke of earlier in the call? And then second question is about Silicon Valley, if you think Silicon Valley is in trouble, as far as the transportation and mobility initiatives go and might need victory at this point, might need the traditional car business to show it the way to bring some kind of value monetize some of these opportunities?

Yes. And, Matthew, let me take the first one first. The AV is a perfect candidate for the techniques that you hear me talk about and for all kinds of reasons, just a highlight for you because we can look back with perfect hindsight and say, who were the leaders in the computer industry Commodore, Atari, Digital, at the time when I was young and PCs were starting to come out, IBM came later. And all four of them weren't going to win and most of what the history will show us was the use evolution of the science happened too late. So I'm trying to bring the discipline that says this technology is coming really fast and we've got to make it people centered very early if in our way of winning, so. So let's use that, the leverage of that is as I look at your second question, I don't – I would never -- it would be arrogant for me to say the valley is in trouble in any kind of regard, kind of work that's created out there and value for shareholders. But I think you've heard me say a few times, I don't think we have to cede the future of the transportation to them, in ways that Ford isn't here. I just don't believe that. And I've been saying this in meetings I have had with analyst and press that they may need us more than we need them, because the export of software is not as difficult as the export of the vehicle constructs that we've learned. These vehicles have to protect people, save lives and have to perform in extreme conditions. And so, that stuff, we have a lot of awareness about. The concern that anyone would have is we, are we, were we asleep at the switch that we didn't understand them coming; of course, we do. In fact, there is Ford people that have been recruited into some of those businesses. So I'd like the – I'd like the challenge of trying to prove to everybody that this technique I'm talking about our capabilities married together, make us a really good player in the future.

All right. Sure. Thank you.

This concludes the question-and-answer session. I will turn the call back to Jim Hackett for closing remarks.

Yes. So I just want to thank everyone for joining us today. I appreciate you being patient with me as I start the 100 days, I want you to know, every day I get up, I think about clarity and focus in delivering, understanding about where we are going and so we look forward to meeting you in the fall with more information.

This concludes the Ford Motor Company earnings conference call. Thank you for your participation. You may now disconnect.