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FORM 10-K

313-322-3000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

        Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   ü        No       

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ü  

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes   ü        No     

        As of June 30, 2003, Ford had outstanding 1,762,162,479 shares of Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($10.99 a share), the aggregate market value of such Common Stock was $19,366,165,644. Although there is no quoted market for our Class B Stock, shares of Class B Stock may be converted at any time into an equal number of shares of Common Stock for the purpose of effecting the sale or other disposition of such shares of Common Stock. The shares of Common Stock and Class B Stock outstanding at June 30, 2003 included shares owned by persons who may be deemed to be “affiliates” of Ford. We do not believe, however, that any such person should be considered to be an affiliate. For information concerning ownership of outstanding Common Stock and Class B Stock, see the Proxy Statement for Ford’s Annual Meeting of Stockholders to be held on May 13, 2004 (our “Proxy Statement”), which is incorporated by reference under various Items of this Report.

        As of February 27, 2004, Ford had outstanding 1,760,536,756 shares of Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($13.75 a share), the aggregate market value of such Common Stock was $24,207,380,395.

DOCUMENT INCORPORATED BY REFERENCE*

*	As stated under various Items of this Report, only certain specified portions of such document are incorporated by reference in this Report.

Table of Contents

PART I

ITEM 1. BUSINESS

      Ford Motor Company (referred to herein as “Ford”, the “Company”, “we”, “our” or “us”) was incorporated in Delaware in 1919. We acquired the business of a Michigan company, also known as Ford Motor Company, incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. We are one of the world’s largest producers of cars and trucks combined. We and our subsidiaries also engage in other businesses, including financing and renting vehicles and equipment.

      In addition to the information about Ford and its subsidiaries contained in this Report, extensive information about our Company can be found throughout our website located at www.ford.com, including information about our management team, our brands and products, and our corporate governance principles.

      The corporate governance information on our website includes our Corporate Governance Principles, our Code of Ethics for Senior Financial Personnel, our Code of Ethics for Directors, our Standards of Corporate Conduct for all employees, and the Charters for each of our Board Committees. In addition, amendments to, and waivers granted to our directors and executive officers under, our Codes of Ethics, if any, will be posted in this area of our website. These corporate governance documents can be accessed by logging onto our website and clicking on the “Corporate Governance” link.

      You will then see a list of corporate governance documents. Click on the document you desire to access. In addition, printed versions of our Corporate Governance Principles, our Code of Ethics for Senior Financial Personnel, our Standards of Corporate Conduct and the Charters for each of our Board Committees can be obtained, free of charge, by writing to our Shareholder Relations Department, Ford Motor Company, One American Road, P.O. Box 1899, Dearborn, Michigan 48126-1899.

      In addition to the Company information discussed above provided on our website, all of our periodic report filings with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free of charge, through our website, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to those reports. Also, each Section 16 filing made with the SEC by the Company or any of its executive officers or directors with respect to our common stock are made available, free of charge, through our website. The periodic reports and amendments and the Section 16 filings are available through our website as soon as reasonably practicable after such report or amendment is electronically filed with the SEC.

      To access our SEC reports or amendments or the Section 16 filings, log onto our website and click on the following link on each successive screen.

	•	“Investor Information”
	•	“Company Reports”
	•	“U.S. S.E.C. EDGAR”
	•	“Click here to continue to view SEC Filings”

You will then see a list of reports filed with the SEC. Click on the report you desire to access.

      The foregoing information regarding our website and its content is for your convenience only. The content of our website is not deemed to be incorporated by reference in this report or filed with the SEC.

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Overview

      Segments. Our business is divided into two business sectors: the Automotive sector and the Financial Services sector. We manage these sectors as four primary operating segments as described below.

      We provide financial information (such as, revenues, income, and assets) for each of these business sectors and operating segments in three areas of this Report: (1) Item 6. “Selected Financial Data” on page 32; (2) Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 33 through 67, and (3) Notes 2, 20 and 21 of the Notes to Financial Statements located at the end of this Report. Financial information relating to certain geographic areas is also included in the above-mentioned Notes.

      Revitalization Plan. Following an extensive review of all of our operations, in particular those in North and South America, on January 11, 2002, we announced a revitalization plan (the “Revitalization Plan”) that included the following elements:

	•	New products: A product-led revitalization program that will result in the introduction of 20 new or freshened products in the United States annually between January 2002 and mid-decade.
	•	Plant capacity: Reduction of North American installed final assembly capacity by about one million vehicles by mid-decade to realign capacity with market conditions.
	•	Hourly workforce: Reduction of about 12,000 hourly employees in North America by mid-decade.

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	•	Salaried workforce: Our 2001 voluntary separation program for salaried employees and other related actions resulted in a 3,500-person workforce reduction in North America. An additional 1,500-person salaried workforce reduction was achieved in 2002 to reach the goal of 5,000.

	•	Global workforce: Reduction of more than 35,000 employees by combined actions around the world by mid-decade, including selected actions prior to 2002. These include: 21,500 in North America — 15,000 hourly, 5,000 salaried and 1,500 agency employees — and 13,500 in the rest of the world.
	•	Cost Reductions: A total of $6 billion of cost reductions related to material costs, overhead reductions and improvements in capacity utilization by mid-decade.
	•	Discontinued low-margin models: Discontinuance of the Mercury Cougar, Mercury Villager, Lincoln Continental and most models of the Ford Escort, which occurred in 2002.
	•	Beyond North America: Revitalization plans beyond North American automotive operations included the continued implementation of the European transformation strategy, the Premier Automotive Group strategy, the turnaround in South America and a revised direction for Ford Motor Credit Company.
	•	Divestitures: Disposition of non-core assets and businesses.

      Progress on Revitalization Plan. Overall, we are on track to achieve the objectives contained in our Revitalization Plan. For a discussion of our progress with respect to the Revitalization Plan, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”.

Automotive Sector

General

      We sell cars and trucks throughout the world. In 2003, we sold 6,724,000 vehicles throughout the world. Our automotive vehicle brands include Ford, Mercury, Lincoln, Volvo, Jaguar, Land Rover, and Aston Martin.

      Substantially all of our cars, trucks and parts are marketed through retail dealers in North America, and through distributors and dealers outside of North America. At December 31, 2003, the approximate number of dealers and distributors worldwide distributing our vehicle brands was as follows: Ford, 10,651; Mercury, 2,016; Lincoln, 1,544; Volvo, 2,277; Jaguar, 814; Land Rover, 1,524; Aston Martin, 104. Because many of these dealerships distribute more than one of our brands from the same sales location, a single dealership may be counted under more than one brand. In addition to the products we sell to our dealers for retail sale, we also sell cars and trucks to our dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Sales to all of our fleet customers in the United States in the aggregate have represented between 22% and 23% of our total United States car and truck sales for the last five years. We do not depend on any single customer or small group of customers to the extent that the loss of such customer or group of customers would have a material adverse effect on our business.

      In addition to producing and selling cars and trucks, we also provide retail customers with a wide range of after-the-sale vehicle services and products through our dealer network, in areas such as maintenance and light repair, heavy repair, collision, vehicle accessories and extended service warranty. In North America, we market these products and services under several brands including Genuine Ford and Lincoln-Mercury Parts and Service^SM, Ford Extended Service Plan^SM (ESP), and Motorcraft^SM.

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      The worldwide automotive industry, Ford included, is affected significantly by a number of factors over which we have little control, including general economic conditions. The automotive industry is a highly-competitive, cyclical business that has a wide variety of product offerings. The number of cars and trucks sold (commonly referred to as “industry demand”) can vary substantially from year to year. In any year, industry demand depends largely on general economic conditions, the cost of purchasing and operating cars and trucks, and the availability and cost of credit and fuel. Industry demand also reflects the fact that cars and trucks are durable items that people generally can wait to replace.

      Our unit sales vary with the level of total industry demand and our share of that industry demand. Our share is influenced by how our products compare with those offered by other manufacturers based on many factors, including price, quality, styling, reliability, safety, and functionality. Our share also is affected by our timing of new model introductions and manufacturing capacity limitations. Our ability to satisfy changing consumer preferences with respect to type or size of vehicle, as well as design and performance characteristics, can impact our sales and earnings significantly.

      The profitability of vehicle sales is affected by many factors, including the following:

	•	unit sales volume
	•	the mix of vehicles and options sold
	•	the margin of profit on each vehicle sold
	•	the level of “incentives” (price discounts) and other marketing costs
	•	the costs for customer warranty claims and additional service actions
	•	the costs for safety, emission and fuel economy technology and equipment
	•	the ability to manage costs

Further, because Ford and other manufacturers have a high proportion of costs that are fixed (including relatively fixed labor costs), small changes in unit sales volumes can significantly affect overall profitability.

      In addition, the automobile industry continues to face a very competitive pricing environment, driven in part by industry excess capacity. For the past several decades, manufacturers typically have given price discounts and other marketing incentives to purchasers to maintain production levels and market shares. A discussion of our revenue management strategy to compete in this pricing environment is set forth below in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”.

      Competitive Position. The worldwide automotive industry consists of many producers, with no single dominant producer. Certain manufacturers, however, account for the major percentage of total sales within particular countries, especially their countries of origin. Detailed information regarding our competitive position in the principal markets where we compete can be found below as part of the overall discussion of the automotive industry in those markets.

      Seasonality. We generally record the sale of a vehicle (and recognize sales proceeds in revenue) when it is produced and shipped to our customer (i.e., our dealer or distributor). We manage our vehicle production schedule based on a number of factors, including dealer stock levels (i.e., number of units held in inventory by our dealers and distributors for sale to retail and fleet customers) and retail sales (i.e., units sold by our dealers and distributors to their customers at retail). There generally is no material seasonal impact on our production levels or the overall business. To the extent that we do experience some fluctuation in the business of a seasonal nature, it has generally occurred in the second and third quarters and primarily is the result of the annual

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two to three week summer shutdown of our manufacturing facilities during the third quarter. This downtime is used to prepare our manufacturing facilities for the annual new model year changeover. Typically, production is higher in the second quarter in anticipation of the shutdown and lower in the third quarter due to the two to three weeks of downtime. As a result, operating results for the third quarter typically are less favorable than those of the other quarters.

      Raw Materials. We purchase a wide variety of raw materials for use in the production of our vehicles from numerous suppliers around the world. These raw materials include non-ferrous metals (e.g., aluminum), precious metals (e.g., palladium, platinum and rhodium), ferrous alloys (e.g., steel), energy (e.g., natural gas) and resins (e.g., polypropylene). We believe that we have adequate supplies or sources of availability of the raw materials necessary to meet our needs. However, there are risks and uncertainties with respect to the supply of certain of these raw materials that could impact their availability in sufficient quantities to meet our needs.

      Backlog Orders. We generally produce and ship our products on average within approximately 20 days after an order is deemed to become firm. Therefore, no significant amount of backlog orders accumulates during any period.

      Intellectual Property. We own, or hold licenses to use, numerous patents, copyrights and trademarks on a global basis. Our policy is to protect our competitive position by, among other methods, filing U.S. and international patent applications to protect technology and improvements that we consider important to the development of our business. As such, we have generated a large number of patents related to the operation of our business and expect this portfolio to continue to grow as we actively pursue additional technological innovation. We currently have over 11,000 active patents and pending patent applications globally, with an average age for patents in our active patent portfolio being 5 years. In addition to this intellectual property, we also rely on our proprietary knowledge and ongoing technological innovation to develop and maintain our competitive position. While we believe these patents, patent applications and know-how, in the aggregate, to be important to the conduct of our business, and we obtain licenses to use certain intellectual property owned by others, none is individually considered material to our business. Similarly, we own numerous trademarks and service marks that contribute to the identity and recognition of our company and its products and services globally. Certain of these marks are integral to the conduct of our business, the loss of which could have a material adverse effect on our business.

United States

      Sales Data. The following table shows U.S. industry sales of cars and trucks for the years indicated:

      We classify cars by small, medium, large and premium segments and trucks by compact pickup, bus/van (including minivans), full-size pickup, sport utility vehicles and medium/ heavy segments. However, with the introduction of crossover or hybrid vehicle lines, the distinction between traditional cars and trucks has become more difficult to draw and these vehicles are not consistently classified as either by the various manufacturers. In the tables below, crossover vehicles have been classified as sport utility vehicles. The term “bus” as used in this discussion refers to vans designed to carry

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passengers. The following tables show the proportion of United States car and truck unit sales by segment for the industry (including both domestic and foreign-based manufacturers) and Ford (including all of our brands sold in the U.S.) for the years indicated:

      As the tables above indicate, there has been a general shift from cars to trucks for both industry sales and Ford sales. This shift has been occurring gradually over a number of years. Ford’s sales of trucks as a percentage of its total vehicle sales has also increased since 1999 because of higher sales of sport utility vehicles and full-size pickups. Ford’s sales of the small and medium car segment as a percentage of its total sales has deteriorated more than the general decline of the industry sales in these segments because of the discontinuance of certain product offerings (e.g., Ford Escort, Mercury Cougar, Ford Contour and Mercury Mystique) and reduction in low-margin daily rental car business. Ford’s sales of the premium car segment as a percentage of total Ford

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U.S. car sales has increased since 1998 because of the addition of Volvo vehicles as a result of our purchase of Volvo Car Corporation on March 31, 1999 and expansion of our Jaguar car product offerings. The decline in premium car sales in 2003 primarily reflects the discontinuance of certain product offerings (e.g. Lincoln Continental).

     Market Share Data. Our principal competitors in the United States include General Motors Corporation, DaimlerChrysler Corporation, Toyota Corporation, and Honda Motor Corporation. The following tables show changes in car and truck United States market shares for Ford (including all of our brands sold in the U.S.) and the other four leading vehicle manufacturers for the years indicated. The percentages in each of the following tables represent the percentage of the combined car and truck industry.

_______________
*      All U.S. retail sales data are based on publicly available information from the media and trade publications.

**	Ford purchased Volvo Car on March 31, 1999 and Land Rover on June 30, 2000. The figures shown here include Volvo Car and Land Rover on a pro forma basis for the periods prior to their acquisition by Ford. In 1999, Land Rover represented less than 0.2 percentage points of total market share.

***	“All Other” includes primarily companies based in various European countries, Korea and other Japanese manufacturers and, with respect to the U.S. Truck Market Shares table and U.S. Combined Car and Truck Market Shares table, includes heavy truck manufacturers.

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     The decline in overall market share for Ford since 1999 is primarily the result of increased competition and, in particular, an increased number of new competitive truck product offerings. In addition, this decline also reflects actions we have taken to improve our profitability, including the discontinuance of a number of vehicles and a planned reduction in low-margin daily rental car sales.

      Fleet Sales. The sales data and market share information provided above include both retail and fleet sales. Fleet sales include sales to daily rental car companies, commercial fleet customers, leasing companies and governments. Fleet sales generally are less profitable than retail sales and, within the fleet sales category, sales to daily rental car companies generally are less profitable than sales to other fleet purchasers.

      The table below shows our fleet sales in the United States, and the amount of those sales as a percentage of our total United States car and truck sales, for the last five years.

      As the table above indicates, sales to daily rental car companies are down for the third consecutive year. This decline reflects primarily the continued execution of our strategy of reducing sales to daily rental car companies to improve our overall profitability. The decline in Commercial and Other Units Sold reflects, in part, a broad weakness in this segment driven by difficult economic conditions.

      Warranty Coverage and Additional Service Actions. We presently provide warranty coverage for defects in factory-supplied materials and workmanship on all vehicles in the United States. The warranty coverage for Ford/Mercury vehicles generally extends for 36 months or 36,000 miles (whichever occurs first) and covers components of the vehicle, including tires beginning January 1, 2001 for 2001 and later model years. Prior to January 1, 2001, tires were warranted only by the tire manufacturers. The United States warranty coverage for luxury vehicles (Lincoln, Jaguar, Volvo and Land Rover) extends for 48 months or 50,000 miles (whichever occurs first) but, except for 2001 or later model year Lincoln and Volvo vehicles, does not include tires, which are warranted by the tire manufacturers. Warranty coverage for safety restraint systems (safety belts, air bags and related components) extends for 60 months or 50,000 miles (whichever occurs first), except on Volvo vehicles, which is 60 months/ unlimited mileage. Also, corrosion damage resulting in perforation (holes) in body sheet metal panels is covered on 1995 and newer models for 60 months/ unlimited mileage, with 72 months/ unlimited mileage on Jaguar/Land Rover products and 96 months/ unlimited mileage on Volvo vehicles. In addition, the Federal Clean Air Act requires warranty coverage for 8 years or 80,000 miles (whichever occurs first) for emissions equipment (e.g., catalytic converter and powertrain control module) on most light duty vehicles sold in the United States. As a result of these warranties, costs for warranty repairs can be substantial.

      In addition to the costs associated with the contractual warranty coverage provided on our vehicles, we also incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions.

      Estimated warranty costs and additional service action costs for each vehicle sold by us are accrued at the time of sale. Accruals for estimated warranty costs and additional service action costs are subject to adjustment from time to time depending on actual experience.

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     For additional information with respect to costs for warranty and additional service actions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Note 23 of the Notes to Financial Statements.

Europe

      Market Share Information. Outside of the United States, Europe is our largest market for the sale of cars and trucks. We consider Europe to consist of the following 19 markets: Britain, Germany, France, Italy, Spain, Austria, Belgium, Ireland, Netherlands, Portugal, Switzerland, Finland, Sweden, Denmark, Norway, Czech Republic, Greece, Hungary and Poland. The automotive industry in Europe is intensely competitive. Our principal competitors in Europe include General Motors Corporation, DaimlerChrysler Corporation, Volkswagen A.G., PSA, Renault Group, Fiat SPA and Toyota Corporation. For the past 10 years, the top six manufacturers have collectively held between 72% and 78% of the total car market. This competitive environment is expected to intensify further as Japanese manufacturers increase their production capacity in Europe, and all of the other (non-Ford) manufacturers of premium brands (e.g., BMW, Mercedes Benz and Audi) continue to broaden their product offerings. For a discussion of restructuring actions taken in Europe in 2003, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      In 2003, vehicle manufacturers sold approximately 17.1 million cars and trucks in Europe, down 1% from 2002 levels. Our combined car and truck market share in Europe (including all of our brands sold in Europe) in 2003 was 10.7%, down about 0.2 percentage points from 2002.

      Britain and Germany are our most important markets within Europe, although the Southern European countries are becoming increasingly significant. Any adverse change in the British or German market has a significant effect on our total European automotive profits. For 2003 compared with 2002, total industry sales were up 2.0% in Britain and down 0.6% in Germany. Our combined car and truck market share in these markets (including all of our brands sold in these markets) in 2003 was 19.7% in Britain (down 0.9 percentage points from last year) and 8.6% in Germany (down 1.1 percentage points from a year ago).

      Marketing Incentives. The automotive industry in Europe continues to be intensely competitive. In Europe in 2003, increased competition resulted in substantial retail and fleet incentive spending on the part of Ford and most manufacturers, particularly in our key European market of Britain. Similar to the United States, marketing costs in Europe include primarily (i) marketing incentives on vehicles, such as rebates and costs for special financing and lease programs, (ii) accruals for costs and/or losses associated with our required repurchase of certain vehicles sold to daily rental car companies, and (iii) costs for advertising and sales promotions for vehicles. We utilize revenue management strategies in Europe consistent with those in the United States. A discussion of our revenue management strategy is set forth below in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”.

      Motor Vehicle Distribution in Europe. On October 1, 2002, the Commission of the European Union adopted a new regulation that changes the way motor vehicles are sold and repaired throughout the European Community (the “Block Exemption Regulation”). Under the Block Exemption Regulation, manufacturers had the choice to either operate an “exclusive” distribution system with exclusive dealer sales territories, but possible sales to any reseller (e.g., supermarket chains, internet agencies and other resellers not authorized by the manufacturer), who in turn could sell to end customers both within and outside of the dealer’s exclusive sales territory, or a “selective” distribution system.

      We, as well as the vast majority of the other automotive manufacturers, have elected to establish a “selective” distribution system, allowing us to restrict the dealer’s ability to sell our vehicles to unauthorized resellers. In addition, under the “selective” distribution system, we are

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entitled to determine the number of our dealers, but beginning in October 2005, not their location. Under either system, the new rules make it easier for a dealer to display and sell multiple brands in one store without the need to maintain separate facilities. Within this new regulation, the Commission also has adopted sweeping changes to the repair industry. Dealers can no longer be required by the manufacturer to perform repair work themselves. Instead, dealers can subcontract the work to independent repair shops that meet reasonable criteria set by the manufacturer. These authorized repair facilities can perform warranty and recall work, in addition to other repair and maintenance work. While a manufacturer can continue to require the use of its parts in warranty and recall work, the repair facility can use parts made by others that are of comparable quality for all other repair work. We have negotiated and implemented new Dealer, Authorized Repairer and Spare Part Supply contracts on a country-by-country level and, therefore, the Block Exemption Regulation now applies with respect to all of our dealers.

     With these new rules, the Commission intends to increase competition and narrow car price differences from country to country. At this time it is difficult to quantify the full impact of these changes on our European operations. However, in the first year of its existence, the Block Exemption Regulation has contributed to an even more competitive environment in Europe, which, in turn, has contributed to a significant increase in marketing incentives, thus adversely affecting our profitability in Europe.

      Warranty Coverage and Additional Service Actions. Beginning in January 2002, warranty coverage provided by volume manufacturers (including Ford) in most of our European markets increased from one year with unlimited mileage to two years with unlimited mileage. This increase in warranty coverage was prompted by new consumer laws in eleven of the 19 European markets that granted private buyers a two-year period in which to pursue defects in goods (including vehicles and substantial components). Prior to January 2002, Ford provided warranty coverage on Jaguar and Volvo brand (only in Britain) vehicles that extended for 36 months or 60,000+ miles and will continue to provide such warranty coverage. In Britain, Ford provides a warranty package on Ford-brand vehicles that includes a 36 month warranty composed of a 12 month/ unlimited mileage base warranty and free of charge OEW (Extended Service Plan) covering up to a further 24 months and 60,000 miles. Commercial vehicles (e.g., Ford Transit and Ford Transit Connect) carry a 24 month/ unlimited mileage warranty except in Britain where Ford currently provides a 36 month or 100,000 miles base warranty. In Britain, Jaguar and Land Rover provide 36 month/ unlimited mileage warranty, enhanced in January 2002 to unlimited mileage from the previous 60,000 mile warranty. In mainland Europe, Jaguar provides 36 month/ unlimited mileage warranty, enhanced in January 2002 to unlimited mileage from the previous 100,000 km limit; Land Rover provides 36 month 100,000 km warranty, enhanced in November 2001 from the previous 12 month warranty; and Volvo provides 24 month/ unlimited mileage warranty. In addition to the base warranties discussed above, Ford warrants the bodywork of all of its brands against rust perforation for periods between 6 years and 12 years.

      In addition to the costs associated with the contractual warranty coverage provided on our vehicles, we also incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions.

      Estimated warranty costs and additional service action costs for each vehicle sold by us are accrued at the time of sale. Accruals for estimated warranty costs and additional service action costs are subject to adjustment from time to time depending on actual experience.

      For additional information with respect to costs for warranty and additional service actions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Note 23 of the Notes to Financial Statements.

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Other Markets

      Canada and Mexico. Canada and Mexico also are important markets for us. In Canada, industry sales of new cars and trucks in 2003 were approximately 1.6 million units, down 6% from 2002 levels. In 2003, industry sales of new cars and trucks in Mexico were approximately 1 million units, about the same as 2002 levels. Our combined car and truck market share in these markets (including all of our brands sold in these markets) in 2003 was 15.8% in Canada (about the same as last year) and 16.5% in Mexico (about the same as last year).

      South America. Brazil and Argentina are our principal markets in South America. The economic environment in those countries has been volatile in recent years, particularly in 2002, leading to large variations in industry sales. Results have also been influenced by continued weak economic conditions, political uncertainty, and government actions to reduce inflation and public deficits. Industry sales in 2003 were approximately 1.4 million units in Brazil, down about 5% from 2002, and approximately 140,000 units in Argentina, up 46% from 2002. Our combined car and truck market share in these markets (including all of our brands sold in these markets) in 2003 was 12.1% in Brazil (up 1.8 percentage points from last year) and 21.8% in Argentina (up 5.3 percentage points from a year ago).

      Ford has undertaken restructuring actions in recent years to improve its competitiveness in South America. In addition, we built a new assembly plant in Brazil, which manufactures a new family of vehicles for the South American markets and other markets.

      Asia Pacific. In the Asia Pacific region, Australia, Taiwan, Thailand and Japan are our principal markets. Details of the industry volumes and our combined car and truck market share for these countries (including all of our brands sold in a particular country) are shown below.

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* Our combined car and truck market share in Japan has been less than 1% in recent years.

      In addition, we own a 33.4% interest in Mazda Motor Corporation (“Mazda”) and account for Mazda on an equity basis. Mazda’s market share in Japan has been in the 5% range in recent years. Our principal competition in the Asia Pacific region has been the Japanese manufacturers. We anticipate that the ongoing relaxation of import restrictions (including duty reductions) will continue to intensify competition in the region.

      We began operations in India in 1999, launching an all-new small car (the Ikon) designed specifically for that market. In addition, Ford India sells components to other Ford affiliates.

      We also are in the process of increasing our presence in China. During 2002, a new purchasing office was established in China to take advantage of sourcing opportunities for global markets from that country. Changan Ford is our 50/50 joint venture operation with Chongqing Changan Automobile Co, Ltd. The Changan Ford assembly plant located in Chongqing became operational and began producing the Fiesta model in January 2003 and the Mondeo model in mid-2003. We have also announced that more than $1 billion would be invested over the next several years to expand manufacturing capacity, introduce new products and expand distribution channels in the Chinese automotive market. The investment will initially support the addition of new products and expansion of production capacity at Changan Ford from 20,000 units a year to 150,000 units per year. It will

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also support the establishment of a second assembly plant and a new engine plant. In addition, we have a 30% interest in Jiangling Motors Corporation with operations located in Nanchang. We also import Jaguar, Volvo, Land Rover, and selected Ford vehicles into China.

Financial Services Sector

Ford Motor Credit Company

      Ford Motor Credit Company (“Ford Credit”) provides vehicle and dealer financing in 36 countries to more than 11 million customers and more than 12,500 automotive dealers. Ford Credit is an indirect, wholly-owned subsidiary of Ford.

      Ford Credit offers a wide variety of automotive financial services to and through automotive dealers throughout the world. Ford Credit’s primary financial products fall into three categories:

	•	Retail financing — purchasing retail installment sale contracts and retail leases from dealers, and offering financing to commercial customers, primarily vehicle leasing companies and fleet purchasers, to purchase or lease vehicle fleets.
	•	Wholesale financing — making loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing.
	•	Other financing — making loans to dealers for working capital, improvements to dealership facilities, and the acquisition and refinancing of dealership real estate.

      Ford Credit also services the finance receivables and leases it originates and purchases, makes loans to Ford affiliates, purchases certain receivables of Ford and its subsidiaries and provides insurance services related to its financing programs. Ford Credit’s revenues are earned primarily from retail installment sale contracts and retail leases, including interest supplements and other support payments it receives from Ford on special-rate retail financing programs, from investment and other income related to sold receivables, and from payments made under wholesale and other dealer loan financing programs.

      Ford Credit does business in all 50 states of the United States through about 160 dealer automotive financing branches and seven regional service centers, and does business in all provinces in Canada through 16 dealer automotive financing branches and two regional service centers. Outside the United States, FCE Bank plc (“FCE”) is Ford Credit’s largest operation. FCE’s primary business is to support the sale of Ford vehicles in Europe through the Ford dealer network. A variety of retail, leasing and wholesale finance plans are provided in most countries in which it operates. FCE does business in the United Kingdom, Germany and most other European countries. Ford Credit, through its subsidiaries, also operates in Mexico, Puerto Rico, Brazil, Chile, Venezuela, Argentina, Australia, Japan, Taiwan, Thailand and New Zealand. Ford Credit also operates through joint ventures with local financial institutions and other third parties in India, Indonesia, South Africa and Saudi Arabia. In addition, Ford Credit manages Ford’s vehicle financing operations in other countries where Ford Credit does not have operations.

      Ford Credit’s share of retail financing for new Ford, Lincoln and Mercury brand vehicles sold by dealers in the United States and new Ford-brand vehicles sold by dealers in Europe and Ford

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Credit’s share of wholesale financing for those brands of vehicles acquired by dealers in the United States and Europe were as follows during the last three years:

      For a detailed discussion of Ford Credit’s on-balance sheet receivables, managed receivables, receivables sold through securitizations and whole-loan sale transactions, credit losses, allowance for credit losses, loss-to-receivables ratios, funding sources and funding strategies, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. For a discussion of how Ford Credit manages its financial market risks, see Item 7A. “Quantitative and Qualitative Disclosure About Market Risk”.

      The predominant share of Ford Credit’s business consists of financing our vehicles and supporting our dealers. Any extended reduction or suspension of the production or sale of our vehicles due to a decline in consumer demand, work stoppage, governmental action, negative publicity or other event, or significant changes to marketing programs sponsored by us, would likely have an adverse effect on Ford Credit’s business.

      We periodically sponsor special-rate financing programs available only through Ford Credit. Under these programs, we make interest supplement or other support payments to Ford Credit. These programs may increase Ford Credit’s financing volume and share of financing sales of Ford vehicles. See Note 1 of the Notes to Financial Statements for more information about these support payments.

      Under a profit maintenance agreement with Ford Credit, we have agreed to make payments to maintain Ford Credit’s earnings at certain levels. In addition, under a support agreement with FCE, Ford Credit has agreed to maintain FCE’s net worth above a minimum level. No payments were made under either of these agreements during the 2001 through 2003 periods.

The Hertz Corporation

      The Hertz Corporation (“Hertz”) and its affiliates, associates and independent licensees represent what Hertz believes is the largest worldwide general use car rental brand based upon revenues. Hertz maintains a substantial network of company-owned car rental locations both in the United States and in Europe, and what it believes to be the largest number of on-airport car rental locations in the world, enabling Hertz to provide consistent quality, pricing and service worldwide. Hertz derives approximately 74% of its car rental revenues from on-airport locations. The Hertz #1 Club Gold^TM service provides an expedited rental service to members worldwide. Through its many travel industry relationships with airlines and hotels, Hertz has targeted the most frequent travelers to become Hertz #1 Club Gold^TM members.

      Hertz, through its wholly owned subsidiary, Hertz Equipment Rental Corporation (“HERC”), also operates one of the largest industrial and construction equipment rental businesses in North America based upon revenues and maintains a significant market share in the North American industrial and construction equipment rental market. HERC rents a broad range of earthmoving equipment,

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material handling equipment, aerial and electrical equipment, air compressors, pumps, small tools, compaction equipment and construction-related trucks.

     Other activities of Hertz include self-insurance operations for both its car rental and industrial and construction equipment rental businesses, the sale of its used cars and equipment and third-party claim management services.

      Hertz operates its businesses from approximately 7,200 locations throughout the United States and in over 150 foreign countries and jurisdictions. Hertz is an indirect, wholly-owned subsidiary of Ford.

      Below are some financial highlights for Hertz as consolidated in our Statement of Income (in millions):

Governmental Standards

      A number of governmental standards and regulations relating to safety, corporate average fuel economy (“CAFE”), emissions control, noise control, damageability, and theft prevention are applicable to new motor vehicles, engines, and equipment manufactured for sale in the United States, Europe and elsewhere. In addition, manufacturing and assembly facilities in the United States, Europe and elsewhere are subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances. Such facilities in the United States and Europe also are subject to comprehensive national, regional, and/or local permit programs with respect to such matters.

      Mobile Source Emissions Control — U.S. Requirements. The Federal Clean Air Act imposes stringent limits on the amount of regulated pollutants that lawfully may be emitted by new motor vehicles and engines produced for sale in the United States. Currently, most light duty vehicles sold in the United States must comply with these standards for 10 years or 100,000 miles, whichever first occurs. The U.S. Environmental Protection Agency (“EPA”) has promulgated post-2004 model year standards that are more stringent than the default standards contained in the Clean Air Act. These new regulations will require most light duty trucks to meet the same emissions standards as passenger cars by the 2007 model year. The stringency of the new standards presents compliance challenges and is likely to hinder efforts to employ light-duty diesel technology, which could negatively impact our ability to meet CAFE standards. The EPA also has promulgated post-2004 emission standards for “heavy-duty” trucks (8,500-14,000 lbs. gross vehicle weight). These standards are likely to pose technical challenges and may affect the competitive position of full-line vehicle manufacturers such as Ford.

      Pursuant to the Clean Air Act, California has received a waiver from the EPA to establish its own unique emissions control standards. New vehicles and engines sold in California must be certified by the California Air Resources Board (“CARB”). CARB has adopted stringent vehicle emissions standards that started phasing in with the 2004 model year. These new standards treat most light duty trucks the same as passenger cars and require both types of vehicles to meet new stringent emissions requirements. As with the EPA’s post-2004 standards, CARB’s vehicle standards present a difficult engineering challenge, and will essentially rule out the use of light-duty diesel technology.

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     Since 1990, the California program has included requirements for manufacturers to produce and deliver for sale zero-emission vehicles, which produce no emissions of regulated pollutants (“ZEV”). Currently available ZEVs are typically battery-powered vehicles with narrow consumer appeal due to their limited range, reduced functionality, and high cost. The ZEV mandate initially required that a specified percentage of each manufacturer’s vehicles produced for sale in California, beginning at 2% in 1998 and increasing to 10% in 2003, must be ZEVs. In 1996, CARB eliminated the ZEV mandate for the 1998-2002 model years, but retained the 10% mandate in a modified form beginning with the 2003 model year. Around the same time, vehicle manufacturers voluntarily entered into agreements with CARB to conduct ZEV demonstration programs.

      In 2001, CARB proposed a number of changes to the ZEV mandate that were ultimately withdrawn, in part as a result of litigation by some manufacturers. In April 2003, CARB voted to adopt new amendments to the ZEV mandate that shift the near-term focus of the regulation away from battery-electric vehicles to advanced-technology vehicles (e.g., hybrid electric vehicles or compressed natural gas vehicles) with extremely low — but not zero — tailpipe emissions. The rules also give some credit for so-called “partial zero emission vehicles” (“PZEVs”), which can be internal combustion engine vehicles certified to very low tailpipe emissions and zero evaporative emissions. In addition, the rules call on the industry to ramp up production of zero-emission fuel cell vehicles over the longer term. In the aggregate, the industry must produce 250 zero-emission fuel cell vehicles by the 2008 model year, and 2,500 more in the 2009-2011 model year period. A panel of independent experts will review the feasibility of these requirements in 2006. While the changes appear to reflect a recognition that battery-electric vehicles simply do not have the potential to achieve widespread customer acceptance, there are substantial questions about the feasibility of producing the required number of fuel-cell vehicles due to the substantial engineering challenges and high costs associated with this technology.

      The Clean Air Act permits other states that do not meet national ambient air quality standards to adopt California’s motor vehicle emission standards no later than two years before the affected model year. New York, Massachusetts, Vermont, and Maine adopted the California standards effective with the 2001 model year or before. New York and Massachusetts have adopted the California ZEV mandate along with alternative ZEV compliance programs. In January 2004, the New Jersey legislature voted to adopt California standards, including the ZEV mandate. Other states, including Maryland and Connecticut, are currently considering the adoption of California standards. There are problems with transferring California standards to northeast states, including the following: 1) the driving range of ZEVs is greatly diminished in cold weather, thereby limiting their market appeal; and 2) the northeast states have refused to adopt the California reformulated gasoline regulations, which may impair the ability of vehicles to meet California’s in-use standards.

      Ford has accumulated ZEV credits in California, New York and Massachusetts through sales of TH!NK brand electric vehicles, and it has plans to accumulate more credits by selling future PZEV models. In the longer term, however, it is doubtful whether the market will support the number of battery electric vehicles called for by the modified ZEV mandate. Fuel cell technology may in the future enable production of ZEVs with widespread consumer appeal. However, due to the engineering challenges, the high cost of the technology, infrastructure needs, and other issues, it does not appear that mass production of fuel cell vehicles will be commercially feasible for years to come. Compliance with the ZEV mandate may eventually require costly actions that would have a substantial adverse effect on Ford’s sales volume and profits. For example, Ford could be required to curtail the sale of non-electric vehicles and/or offer to sell electric vehicles well below cost. Other states may seek to adopt CARB’s ZEV mandate pursuant to the Clean Air Act, thereby increasing the costs to Ford.

      Under the Clean Air Act, the EPA and CARB can require manufacturers to recall and repair non-conforming vehicles. The EPA, through its testing of production vehicles, also can halt the

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shipment of non-conforming vehicles. Ford may be required to recall, or may voluntarily recall, vehicles for such purposes in the future. The costs of related repairs or inspections associated with such recalls, or the cost of a stop-shipment order, could be substantial.

     European Requirements. European Union (“EU”) directives and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU. In 1998, the EU adopted a new directive on emissions from passenger cars and light commercial trucks. More stringent emissions standards applied to new car certifications beginning January 1, 2000 and to new car registrations beginning January 1, 2001 (“Stage III Standards”). A second level of even more stringent emission standards will apply to new car certifications beginning January 1, 2005 and to new car registrations beginning January 1, 2006 (“Stage IV Standards”). The comparable light commercial truck Stage III Standards and Stage IV Standards come into effect one year later than the passenger car requirements. The directive includes a framework that permits EU member states to introduce fiscal incentives to promote early compliance with these standards. The directive also introduced on-board diagnostic requirements, more stringent evaporative emission requirements, and in-service compliance testing and recall provisions for emissions-related defects that occur in the first five years or 80,000 kilometers of vehicle life (extended to 100,000 kilometers in 2005). Failures of in-service compliance tests could lead to vehicle recalls with substantial costs for related inspections or repairs. The Stage IV Standards for diesel engines have proven technically difficult and have precluded manufacturers from offering some products in time to be eligible for government incentive programs. A related EU directive was adopted, also in 1998, which establishes standards for cleaner fuels beginning in 2000 and even cleaner fuels in 2005. A further change to the Fuels Directive was agreed in 2003, which reduced the maximum sulphur limit in gasoline and diesel to 10 ppm — widespread market availability is required from 2005 and mandated in 2009. The EU is commencing a program in 2004 to determine the specifics for further changes to vehicle emission standards. These are expected to concentrate on diesel particulates and NOx from 2010.

      Stationary Source Emissions Control — U.S. Requirements. In the United States, the Federal Clean Air Act also requires the EPA to identify “hazardous air pollutants” from various industries and promulgate rules restricting their emission. The EPA has issued proposed or final rules for a variety of industrial categories, several of which would further regulate emissions from our U.S. operations, including engine testing, automobile surface coating and iron casting. These technology-based standards could require certain of our facilities to significantly reduce their air emissions. Additional programs under the Clean Air Act, including Compliance Assurance Monitoring and periodic monitoring could require our facilities to install additional emission monitoring equipment. The cost to us, in the aggregate, to comply with these requirements could be substantial.

      Motor Vehicle Safety — U.S. Requirements. The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates motor vehicles and motor vehicle equipment in the United States in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable motor vehicle safety standards established by the National Highway Traffic Safety Administration (the “Safety Administration”). Meeting or exceeding many safety standards is costly because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer also is obligated to recall vehicles if it determines that they do not comply with a safety standard. Should Ford or the Safety Administration determine that either a safety defect or a noncompliance exists with respect to certain of Ford’s vehicles, the costs of such recall campaigns could be substantial. There were pending before the Safety Administration approximately 10 investigations relating to alleged safety defects or potential compliance issues in Ford vehicles as of February 18, 2004.

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     The Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREAD Act”) was signed into law in November 2000. The TREAD Act mandates that the Safety Administration establish several new regulations including reporting requirements for motor vehicle manufacturers on foreign recalls and certain information received by the manufacturer that may assist the agency in the identification of safety defects.

      Foreign Requirements. Canada, the EU, individual member countries within the EU, and other countries in Europe, South America and the Asia Pacific markets also have safety standards applicable to motor vehicles and are likely to adopt additional or more stringent standards in the future. In addition, the European Automobile Manufacturers Association (of which Ford is a member) (“EAMA”) made a voluntary commitment in June 2001 to introduce a range of safety measures to improve pedestrian protection with the first phase starting in 2005 and a second phase starting in 2010. Similar commitments were subsequently made by the Japanese and Korean automobile manufacturers associations. As a result, over 99% of cars and small vans sold in Europe are covered by industry safety commitments. The European Council of Ministers and the European Parliament published a directive in December 2003 and a decision in February 2004, which together lay down detailed technical provisions for enforcement of the industry commitments (i.e., the application dates, the types of tests to be conducted the test procedures to be used and the limit values to be achieved).

      Motor Vehicle Fuel Economy — U.S. Requirements. Under federal law, vehicles must meet minimum corporate average fuel economy (“CAFE”) standards set by the Safety Administration. A manufacturer is subject to potentially substantial civil penalties if it fails to meet the CAFE standard in any model year, after taking into account all available credits for the preceding three model years and expected credits for the three succeeding model years.

      The law established a passenger car CAFE standard of 27.5 mpg for 1985 and later model years, which the Safety Administration believes it has the authority to amend to a level it determines to be the maximum feasible level. The current CAFE standard applicable to light trucks is 20.7 mpg. In April 2003, the Safety Administration issued a final rule increasing the CAFE standard for light trucks to 21.0 mpg for model year 2005; 21.6 mpg for model year 2006; and 22.2 mpg for model year 2007. The Safety Administration is currently seeking public comment on the possibility of changing the framework of the light truck CAFE standards and/or creating a new vehicle classification scheme. It is anticipated that the Safety Administration will also start a rulemaking process to increase CAFE standards for passenger cars in the near future. There is renewed interest in CAFE in Congress, and there is some potential for new legislation that avoids the regulatory process and establishes new standards by statute.

      Pressure to increase CAFE standards stems in part from concerns over greenhouse gas emissions (“GHGs”), which may affect the global climate. With respect to greenhouse gas emissions, the Bush administration released a climate change policy initiative in February 2002. The Bush administration plan stresses voluntary measures and a cap-and-trade program to stem the growth of greenhouse gas emissions. The Bush administration also has launched the Freedom Car initiative, which supports research for fuel cell-powered vehicles. Other nations continue to press for United States ratification of the so-called “Kyoto Protocol”, which would require the United States to reduce greenhouse gas emissions by 7% below its 1990 levels. The Kyoto Protocol does not currently have the support of either the Bush administration or Congress. Separately, a petition was filed with the EPA requesting that it regulate carbon dioxide (CO₂, a greenhouse gas) emissions from motor vehicles under the Clean Air Act. The petitioners filed suit in an effort to compel a formal response from the EPA. In August 2003, EPA denied the petition on the grounds that 1) the Clean Air Act does not authorize EPA to regulate GHGs, and 2) only the Safety Administration is authorized to regulate fuel economy under the CAFE law. A number of states, cities, and environmental groups have filed for review of EPA’s decision in the United States Court of Appeals

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for the District of Columbia Circuit. We anticipate that a coalition of states and industry trade groups, including the Alliance of Automobile Manufacturers, will seek to intervene in support of EPA’s decision.

     In 2002, California enacted legislation authorizing CARB to regulate greenhouse gas emissions from new motor vehicles beginning in the 2009 model year. Other states are considering similar legislation. CO₂ is the primary greenhouse gas emitted from motor vehicles, and the amount of CO₂ emissions is proportional to the amount of fuel used. It is possible that CARB may attempt to implement the law by setting fleet average standards for vehicle CO₂ emissions, although we believe this would be prohibited by the federal fuel economy law. CARB is expected to promulgate regulations in this area during the 2005 calendar year.

      In general, a continued increase in demand for larger vehicles, coupled with a decline in demand for small and middle-size vehicles, could jeopardize our long-term ability to comply with CAFE standards. In addition, if significant increases in CAFE standards for upcoming model years are imposed beyond those presently in effect or proposed, or if the EPA or other agencies regulate CO₂ emissions from motor vehicles, we might find it necessary to take various costly actions that could have substantial adverse effects on our sales volume and profits. For example, we might have to curtail production of larger, family-size and luxury cars and full-size light trucks, restrict offerings of engines and popular options, and increase market support programs for our most fuel-efficient cars and light trucks.

      Foreign Requirements. The EU also is a party to the Kyoto Protocol and has agreed to reduce greenhouse gas emissions by 8% below their 1990 levels during the 2008-2012 period. In December 1997, the European Council of Environment Ministers (the “Environment Council”) reaffirmed its goal to reduce average CO₂ emissions from new cars to 120 grams per kilometer by 2010 (at the latest) and invited European motor vehicle manufacturers to negotiate further with the European Commission on a satisfactory voluntary environmental agreement to help achieve this goal. In October 1998, the EU agreed to support an environmental agreement with EAMA (of which Ford is a member) on CO₂ emission reductions from new passenger cars (the “Agreement”). The Agreement establishes an emission target of 140 grams of CO₂ per kilometer for the average of new cars sold in the EU by the Association’s members in 2008. In addition, the Agreement established an interim estimated target range of 165-170 grams of CO₂ per kilometer for the average of new cars sold in 2003. In 2004, EAMA and the European Commission will review the potential for additional CO₂ reductions, with a view to moving further toward the EU’s objective. The Agreement assumes (among other things) that no negative measures will be implemented against diesel-fueled cars and the full availability of improved fuels with low sulfur content in 2005. Average CO₂ emissions of 140 grams per kilometer for new passenger cars corresponds to a 25% reduction in average CO₂ emissions compared to 1995.

      The Environment Council requested the European Commission to review in 2004 the EU’s progress toward reaching the 120 gram target by 2010, and to implement annual monitoring of the average CO₂ emissions from new passenger cars and progress toward achievement of the objectives for 2003. To date, the industry has made very good progress and has met the interim target for 2003 (170-165g CO₂/km). The CO₂ target to be achieved for 2008 is 140g CO₂/km.

      In 1995, members of the German Automobile Manufacturers Association (including Ford Werke AG) made a voluntary pledge to increase by 2005 the average fuel economy of new cars sold in Germany by 25% from 1990 levels, to make regular reports on fuel consumption, and to increase industry research and development efforts toward this end. The German Automobile Manufacturers Association has reported that the industry is on track to meet the pledge.

      Other European countries are considering other initiatives for reducing CO₂ emissions from motor vehicles, including fiscal measures. For example, the UK introduced vehicle excise duty and

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company car taxation based on CO₂ emissions in 2001. Taken together, such proposals could have substantial adverse effects on our sales volumes and profits in Europe.

     End-of-Life Vehicle Directive — The European Parliament has published a directive imposing an obligation on motor vehicle manufacturers to take back end-of-life vehicles with zero or negative value registered after July 1, 2002, and to take back all other end-of-life vehicles with zero or negative value as of January 1, 2007, with no cost to the last owner. The directive also imposes requirements on the proportion of the vehicle that may be disposed of in landfills and the proportion that must be reused or recycled beginning in 2006, and bans the use of certain substances in vehicles beginning with vehicles registered after July 2003. Member states may apply these provisions prior to the dates mentioned above.

      Presently, there are numerous uncertainties surrounding the form and implementation of the legislation in different member states, especially regarding manufacturers’ responsibilities and the resultant expenses that may be incurred. As of December 31, 2003, the following member states have adopted legislation to implement the directive: The Netherlands, Germany, Belgium, Austria, Spain, Luxemburg, Italy, France, Ireland, Portugal and Sweden. On April 16, 2003, ten countries signed an accession agreement with the European Union to become new members of the European Union on May 1, 2004. Of those states, only Slovenia has implemented the ELV Directive and the others are expected to implement the ELV Directive during 2004. Based on the legislation that has been enacted to date, we have accrued $103 million at December 31, 2003 for compliance costs we expect to incur in respect of our existing vehicle populations in those and other countries. Depending on the legislation implemented in the ten member states that have not yet enacted legislation and other circumstances, we may be required to make additional accruals for the expected costs to comply with these regulations. Although all of the member states were required to enact legislation to implement the directive by April 21, 2002, implementation of the directive has been delayed in some countries and is now expected to be substantially finalized during 2004. The directive should not, however, result in significant cash expenditures before 2007.

      Mobile Air Conditioning — The European Commission adopted a draft regulation in August 2003 to phase out the use of HFC-134a as a refrigerant in mobile air conditioning units. The regulation would phase out the use of this refrigerant between 2009 and 2013 and provide credits for the early introduction of more leak-resistant air conditioning systems and alternative refrigerants. These requirements may increase the cost of vehicle air conditioning. This proposed regulation has been referred to the European Council and the European Parliament for their consideration.

      European Chemicals Policy — The European Commission adopted a draft regulation in October 2003 for a single system to register, evaluate, and authorize the use of certain chemicals (“REACH”). Final adoption of the regulation is anticipated in 2005 to 2006 with compliance required one to two years later. The regulation may accelerate the ban or restriction on use of certain chemicals and materials, which could increase the costs of certain products and processes used to manufacture vehicles and parts.

      Pollution Control Costs — During the period 2004 through 2008, we expect to spend approximately $430 million on our North American and European facilities to comply with air and water pollution and hazardous waste control standards, which are now in effect or are scheduled to come into effect. Of this total, we estimate spending approximately $122 million in 2004 and $120 million in 2005. Specific environmental expenses are difficult to isolate because expenditures may be made for more than one purpose, making precise classification difficult.

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Employment Data

      The number of on-roll employees we employed at December 31, 2003 and 2002 was:

	______________________ * Includes 7,973 in North America and 6,655 in Ford Europe

      Our labor cost per hour worked for hourly employees of Ford Motor Company (including employees assigned to Visteon Corporation), excluding subsidiaries, for the following years was:

      The increase in benefits for our hourly employees in 2003 over 2002 primarily reflected increased health care costs, a one-time $3,000 lump sum payment to each of our U.S. hourly employees upon the ratification of our new collective bargaining agreement with the UAW (discussed below) and increased pension expense.

      As shown in the table above, from December 31, 2002 to December 31, 2003, the number of people we employ increased approximately one percent. The 2003 number includes 14,628 employees that were added to our on-roll employment numbers as a result of the consolidation of several joint ventures that were deemed variable interest entities of which we are the primary beneficiary under Financial Accounting Standards Board (“FASB”) Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). Excluding the effects of the consolidation of these entities, the number of employees on-roll would have declined 10,910 (or approximately three percent).

      The employment numbers in the table above exclude approximately 20,000 hourly employees of Ford who are assigned to Visteon Corporation (“Visteon”), and, pursuant to our collective bargaining agreement with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”), remain Ford employees. Visteon reimburses us for most of the costs associated with these employees. For information regarding agreements entered into with Visteon in December 2003 relating to these employees and other matters, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

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     Substantially all of the hourly employees in our Automotive operations in the United States are represented by unions and covered by collective bargaining agreements. Approximately 99% of these unionized hourly employees in our Automotive segment are represented by the UAW. Approximately 3% of our salaried employees are represented by unions. Most hourly employees and many non-management salaried employees of our subsidiaries outside the United States also are represented by unions.

      We have entered into collective bargaining agreements with the UAW and the National Automobile, Aerospace, Transportation and General Workers Union of Canada (“CAW”). The agreement with the UAW is scheduled to expire on September 14, 2007 and the agreement with the CAW is scheduled to expire on September 20, 2005. Among other things, our agreements with the UAW and CAW provide for guaranteed wage and benefit levels throughout their terms and provide for significant employment security. As a practical matter, these agreements may restrict our ability to eliminate product lines, close plants, and divest businesses.

      Our new collective bargaining agreements are consistent with our Revitalization Plan and provide us the flexibility necessary to achieve the goals of that plan. This flexibility includes the ability to reduce manufacturing capacity by one million units in North America by closing four assembly plants, improvement in our ability to bring Ford employees assigned to Visteon back to fill plant openings for which we otherwise would have to hire new employees and increased operating flexibility. The return of Ford employees will provide us the opportunity to fill labor requirements from an experienced pool of UAW-represented employees.

      In 2003, we negotiated new agreements with labor unions in Mexico, France, Britain, Sweden, Australia, Taiwan, Thailand, New Zealand, Belgium, and Brazil.

      We are or will be negotiating new collective bargaining agreements with labor unions in Mexico, Germany, Vietnam, South Africa, Taiwan, Britain, Brazil and Venezuela where current agreements will expire in 2004. We will also be negotiating new collective bargaining agreements to cover employees at our Volvo and Jaguar affiliates in 2004.

      In recent years, we have not had significant work stoppages at our facilities, but they have occurred in some of our suppliers’ facilities. A work stoppage could occur as a result of disputes under our collective bargaining agreements with labor unions or in connection with negotiations of new collective bargaining agreements, which, if protracted, could adversely affect our business and results of operation. Work stoppages at supplier facilities for labor or other reasons could have similar consequences if alternate sources of components are not readily available.

      In addition to our collective bargaining agreement with the UAW, in 1989 we entered into a separate agreement with the UAW in connection with the sale of our Dearborn steel-making operations to Rouge Industries, Inc., then known as Marico Acquisition Corp. As part of the sale, employees of our former steel-making operations became employees of Rouge Steel Company, a wholly-owned subsidiary of Rouge Industries, Inc. (“Rouge”). Pursuant to the UAW agreement, we agreed that Rouge hourly employees who, at the time of the sale, were represented by the UAW and met certain seniority requirements would be allowed to return to Ford to work in one of our Rouge area plants if they were laid off by Rouge in the future as a result of a layoff of unknown duration, a permanent discontinuance of operations by Rouge or a sale of the assets of Rouge. The right to return remains in effect with respect to each eligible employee for a period equal to the employee’s Ford seniority as of the date of the sale by Ford. Approximately 700 former Ford employees are covered by this agreement. On October 23, 2003, Rouge filed a voluntary petition under Chapter 11 of the Bankruptcy Code. On December 30, 2003, the bankruptcy court approved the sale of substantially all of Rouge’s assets to Severstal North America, Inc. (“Severstal”), which sale closed on January 30, 2004. On February 23, 2004, Ford entered into an agreement with the UAW to provide opportunities to the employees of Rouge who would have had the right to return to

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Ford under the circumstances described above. These employees were provided an option to (i) continue employment with Severstal, begin receipt of Ford-UAW retirement benefits if otherwise eligible, and waive any claims against Ford relating to the prior agreement, (ii) continue in employment with Severstal for a retention period before termination, begin receipt of Ford-UAW retirement benefits while employed by Severstal if otherwise eligible, and at termination be eligible for an incentive benefit funded by Ford and waive any claims against Ford relating to the prior agreement, or (iii) terminate employment with Severstal, immediately transfer to Ford employment, and waive any claims against Ford relating to the prior agreement.

Engineering, Research and Development

      We conduct engineering, research and development primarily to improve the performance (including fuel efficiency), safety and customer satisfaction of our products, and to develop new products. We also have staffs of scientists who engage in basic research. We maintain extensive engineering, research and design centers for these purposes, including large centers in Dearborn, Michigan; Dunton, Gaydon and Whitley, England; Gothenburg, Sweden; and Aachen and Merkenich, Germany. Most of our engineering research and development relates to our Automotive operating segment. In general, our engineering activities that do not involve basic research or product development, such as manufacturing engineering, are excluded from our engineering, research and development charges discussed below.

      During the last three years, we recorded charges to our consolidated income for engineering, research and development we sponsored in the following amounts: $7.5 billion (2003), $7.7 billion (2002), and $7.3 billion (2001). Any customer-sponsored research and development activities that we conduct are not material.

      Our principal properties include manufacturing and assembly facilities, distribution centers, warehouses, sales or administrative offices and engineering centers.

      We own substantially all of our U.S. manufacturing and assembly facilities. These facilities are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, and transmission plants. Most of our distribution centers are leased (approximately 40% of our total square footage is owned). A substantial amount of our warehousing is provided by third party providers under service contracts. All of the warehouses that continue to be operated by us are leased, although many of our manufacturing and assembly facilities contain some warehousing space. Substantially all of our sales offices are being leased. Approximately 90% of the total square footage of our engineering centers and our supplementary research and development space is owned by us.

      In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers, and engineering centers outside the United States. We own substantially all of the manufacturing plants, assembly facilities, and engineering centers. The majority of our parts distribution centers outside of the United States are either leased or provided by vendors under service contracts.

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     The total number plants, distribution centers/ warehouses, engineering and research and development sites, and sales offices used by the Americas and International segments of our Automotive sector are shown below.

      Included in the number of plants used by the International segment shown above are several plants that are not operated directly by us, but rather by consolidated joint ventures that operate plants that support our Automotive sector. The following are the most significant of these consolidated joint ventures and the number of plants they own.

	•	Ford Otosan — a joint venture in Turkey between Ford (41% partner), the Koc Group of Turkey (41% partner) and public investors (18%) that is our single source supplier of the new Ford Transit Connect vehicle. In addition, we have announced that production of the Ford Transit Van in Europe will increase at the Kocaeli Plant owned by Ford Otosan to effectively replace the production that ceased at our Genk Plant in Belgium. Ford Otosan currently assembles a limited number of Transit Vans for selected markets. Once production of the Ford Transit Van is increased, Ford Otosan will assemble Transit as a major supplier to Ford Europe. Production of the Transit Van in Southampton, England will continue. This joint venture operates two plants.
	•	Getrag Ford Transmissions GmbH — a 50/50 joint venture with Getrag Deutsche Venture GmbH & Co. Kg i.G., a German company, to which we transferred our European manual transmission operations in Halewood, England, Cologne, Germany and Bordeaux, France. In 2004, Volvo Car Corporation (“Volvo Cars”) agreed to transfer its manual transmission operations from its Köping, Sweden plant to this joint venture. The Getrag joint venture produces manual transmissions for our operations in Europe (Ford Europe and PAG). Ford currently supplies most of the hourly and salaried labor requirements of the operations transferred to the Getrag joint venture. Ford employees who worked at the manual transmission operations that were transferred at the time of the formation of the joint venture are assigned to the joint venture by Ford. In the event of surplus labor at the joint venture, Ford employees assigned to the joint venture may return to Ford. Employees hired in the future to work in these operations will be employed directly by the joint venture. Getrag Ford Transmissions GmbH reimburses Ford for the full cost of the hourly and salaried labor supplied by Ford. This joint venture operates or will operate three plants.
	•	Getrag All Wheel Drive AB — a joint venture in Sweden between Getrag Dana Holding GmbH (“Getrag/Dana”) (60 % partner) and Volvo Cars (40% partner). In January 2004, Volvo Cars entered into agreements with Getrag/Dana to transfer Volvo Cars’ plant in Köping, Sweden to this joint venture. The joint venture will produce all wheel drive components and, for a time, chassis components as well. The manual transmission operations at the Köping plant will be transferred to Getrag Ford Transmissions GmbH. The hourly and salaried employees at the plant have become employees of the joint venture.
	•	TEKFOR Cologne GmbH — a 50/50 joint venture with Neumayer Holding GmbH, a German company, to which Ford-Werke AG transferred the operations of the Ford forge in Cologne. The joint venture produces forged components, primarily for transmissions and chassis, for use in Ford vehicles and sale to third parties. Those Ford employees that worked at the Cologne Forge Plant at the time of the formation of the joint venture are assigned to the joint venture by Ford and remain employees of Ford. All new employees hired to work at the forge

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		will be hired as employees of the joint venture. In the event of surplus labor at the joint venture, Ford employees assigned to the joint venture may return to Ford. TEKFOR Cologne GmbH reimburses Ford for full cost of the Ford employees assigned to the joint venture. This joint venture operates one plant.
	•	Pininfarina Sverige, AB — a joint venture between Volvo Cars (40% partner) and Pininfarina, S.p.A. (60% partner). In September 2003, Volvo Cars entered into agreements with Pininfarina to establish this joint venture for the engineering and manufacture of niche vehicles, starting with a new, small convertible. Volvo Cars will outsource the design and engineering to Pininfarina with the manufacturing performed by the joint venture. The joint venture will produce the car at the Uddevalla Plant in Sweden, which was transferred from Volvo Cars to the joint venture and is the joint venture’s only plant.
	•	Ford Vietnam Limited — a joint venture between Ford (75% partner) and Song Kong Diesel (25% partner). Ford Vietnam assembles and distributes several Ford vehicles in Vietnam, including Transit, Laser, Ranger and Escape. This joint venture operates one plant.
	•	Ford India Private Limited — a joint venture between Ford (84% partner) and Mahindra & Mahindra Limited (16% partner). Ford India assembles and distributes the Ford Ikon and Endeavour in India, Nepal and Bangladesh. Ford India also imports and distributes the Mondeo. Ikon kits are exported to Mexico, South Africa and China. This joint venture operates one plant.
	•	Ford Lio Ho Motor Company Ltd. (“FLH”) — a joint venture in Taiwan among Ford (70% partner), the Lio Ho Group (25% partner) and individual shareholders (5% ownership in aggregate) that assembles a variety of Ford and Mazda vehicles sourced from North America, Europe, Mazda, and Suzuki, including Escape, Tribute, Mondeo, Tierra, Mazda Protégé, Econovan, Mazda Bongo, and Suzuki Pronto. In addition to domestic assembly, FLH also imports/ distributes built-up vehicles from North America and Europe. This joint venture operates one plant.

      In addition to the plants that we operate directly or that are operated by consolidated joint ventures, additional plants that support our Automotive sector are operated by other, non-consolidated joint ventures of which we are a partner. These additional plants are not included in the number of plants shown in the table above. The most significant of these joint ventures are:

	•	AutoAlliance International (“AAI”) — a 50/50 joint venture with Mazda (of which we own 33.4%), which owns and operates as its principal business an automobile vehicle assembly plant in Flat Rock, Michigan. AAI currently produces the Mazda6 vehicle and will produce the next-generation Ford Mustang beginning later this year for the 2005 model year. Ford supplies all of the hourly and substantially all of the salaried labor requirements to AAI and AAI reimburses Ford for the full cost of that labor.
	•	AutoAlliance (Thailand) (“AAT”) — a 50/50 joint venture with Mazda, which owns and operates a manufacturing plant in Rayong, Thailand. AAT produces the Ford Ranger, Ford Everest and Mazda B- Series pickup trucks for the Thai market and for export to over 100 countries worldwide (other than North America), in both built up and kit form.
	•	Blue Diamond Truck, S de RL de CV — a joint venture between Ford (49% partner) and International Truck and Engine Corporation (51% partner), a subsidiary of Navistar International Corporation (“Navistar”). Blue Diamond Truck develops and manufactures selected medium and light commercial trucks in Mexico and sells the vehicles to Ford and Navistar for their own independent distribution. Blue Diamond Truck commenced manufacturing operations in December 2002, with its first products, the Ford F-650/750 trucks, being shipped in February 2003.

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	•	Blue Diamond Parts, LLC — a joint venture between Ford (51% partner) and Navistar (49% partner). Blue Diamond Parts manages sourcing, merchandising, and distribution of various replacement parts.

	•	Tenedora Nemak, S.A. de C.V. — a joint venture between Ford (20% partner) and a subsidiary of Alfa S.A. de C.V., a Mexican conglomerate (80% partner), that owns and operates, among other facilities, our former Canadian castings operations and supplies engine blocks and heads to several of our engine plants. Ford supplies a portion of the hourly labor requirements for the Canadian plants, for which it is fully reimbursed by the joint venture.
	•	Changan Ford Automobile Corporation (“Changan Ford”) — a 50/50 joint venture between Ford and the Chongqing Changan Automobile Co, Ltd. Changan Ford produces and distributes in China a compact family sedan vehicle, the Ford Fiesta, and is planning to launch the Ford Mondeo model in 2003.
	•	Jiangling Motors Corporation — a joint venture in China between Ford (30% partner), the Jiangling Motors Company Group of China (41% partner) and public investors (29%) that assembles the Ford Transit Van and other non-Ford vehicles for distribution in China.
	•	Ford Malaysia Sdn. Bhd. — a joint venture between Ford (49% partner) and Tractors Malaysia, a publicly-traded subsidiary of Sime Darby (51% partner). Ford Malaysia distributes Ford vehicles assembled by its wholly-owned subsidiary AMI, an assembly company, including Laser, Ranger, Everest, Escape and Econovan.

      The furniture, equipment and other physical property owned by our Financial Services operations are not material in relation to their total assets.

      The facilities owned or leased by us or our subsidiaries and joint ventures described above are, in the opinion of management, suitable and adequate for the manufacture and assembly of our products.

Overview

      Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against us and our subsidiaries, including, but not limited to, those arising out of the following: alleged defects in our products; governmental regulations covering safety, emissions, and fuel economy; financial services; employment-related matters; dealer, supplier, and other contractual relationships; intellectual property rights; product warranties; environmental matters; and shareholder matters. Some of the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive or antitrust or other multiplied damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions or other relief that, if granted, would require very large expenditures. We regularly evaluate the expected outcome of product liability litigation and other litigation matters. We have accrued expenses for probable losses on product liability matters, in the aggregate, based on an analysis of historical litigation payouts and trends. Expenses also have been accrued for other litigation where losses are deemed probable. These accruals are reflected in our financial statements.

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      Following is a discussion of our significant pending legal proceedings:

Product Liability Matters

      Asbestos Matters. Asbestos was used in brakes, clutches and other automotive components dating from the early 1900s. Along with other vehicle manufacturers, we have been the target of asbestos litigation and, as a result, we are a defendant in various actions for injuries claimed to have resulted from alleged contact with certain Ford parts and other products containing asbestos. Plaintiffs in these personal injury cases allege various health problems as a result of asbestos exposure either from (i) component parts found in older vehicles (ii) insulation or other asbestos products in our facilities or (iii) asbestos aboard our former maritime fleet. The majority of these cases have been filed in the state courts.

      Most of the asbestos litigation we face involves mechanics or other individuals who have worked on the brakes of our vehicles over the years. Also, in most asbestos litigation we are not the sole defendant. We believe we are being more aggressively targeted in asbestos suits because many previously targeted companies have filed for bankruptcy. We are prepared to defend these asbestos related cases and, with respect to the cases alleging exposure from our brakes, believe that the scientific evidence confirms our long-standing position that mechanics and others are not at an increased risk of asbestos related disease as a result of exposure to the type of asbestos formerly used in the brakes on our vehicles.

      The extent of our financial exposure to asbestos litigation remains very difficult to estimate. The majority of our asbestos cases do not specify a dollar amount for damages, and in many of the other cases the dollar amount specified is the jurisdictional minimum. The vast majority of these cases involve multiple defendants, with the number in some cases exceeding 100. Our annual payout and related defense costs in asbestos cases are increasing and may become substantial in the future. The total number of claims pending against us as of February 3, 2004 is approximately 41,500, compared with approximately 25,000 as of February 2003. This, together with the trends in civil litigation toward larger jury verdicts and punitive damages awards, is expected to result in increased payouts and defense costs in 2004.

      The United States Congress continues to consider proposals to reform asbestos litigation. The lead proposal would create a trust fund from which eligible asbestos claimants would be compensated and would preclude, during the life of the trust, litigation in the United States based on exposure to asbestos. The trust fund would be funded by asbestos defendants (including us) and the insurance industry. These funds would be used to pay eligible claimants (i.e., those who satisfy specific medical criteria and can adequately demonstrate occupational exposure to asbestos) according to a specified schedule. If legislation is enacted creating such a trust fund, we would likely be required to make substantial contributions to the fund over a specified period of time, resulting in our incurring a charge in the amount of the present value of such anticipated contributions in the period in which the legislation becomes effective. We cannot predict whether or in what form the legislation will be enacted or the costs associated with such enactment.

      Romo v. Ford. During December, 1994, an action was filed in Superior Court in Stanislaus County, California, alleging that manufacturing and design defects in a 1978 Bronco caused the deaths of three members of the plaintiff’s family. The trial in July 1999 resulted in a jury verdict ordering us to pay $290 million in punitive damages and $5 million in compensatory damages. On May 19, 2003, the United States Supreme Court granted our petition for certiorari and remanded the case for reconsideration in light of the Supreme Court’s decision in State Farm v. Campbell, which held that punitive awards generally cannot exceed nine times the compensatory award and that punitive awards cannot be based on out-of-state or dissimilar conduct. On remand, the California appeals court gave the plaintiffs the choice of either accepting a reduced punitive damages award in

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the amount of approximately $24 million (slightly less than five times the $5 million compensatory damage award) or a new trial. The plaintiffs elected to accept the reduced punitive damages award, which, with interest, amounted to approximately $34.5 million.

Environmental Matters

      General. We have received notices under various federal and state environmental laws that we (along with others) may be a potentially responsible party for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. We also may have been a generator of hazardous substances at a number of other sites. The amount of any such costs or damages for which we may be held responsible could be substantial. The contingent losses that we expect to incur in connection with many of these sites have been accrued and those losses are reflected in our financial statements in accordance with generally accepted accounting principles. However, for many sites, the remediation costs and other damages for which we ultimately may be responsible are not reasonably estimable because of uncertainties with respect to factors such as our connection to the site or to materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation). As a result, we are unable to determine or reasonably estimate the amount of costs or other damages for which we are potentially responsible in connection with these sites, although that total could be substantial.

      Cleveland Engine Plant Notice of Violation. Following an inspection by the Cleveland Local Air Agency (which has been delegated enforcement authority by the Ohio Environmental Protection Agency (“Ohio EPA”)) our Cleveland Engine Plant received a notice of violation in July 2003. The NOV alleged violations of permit limitations for a maintenance paint spray booth and engine testing operations. The potential violations associated with the engine testing operations previously had been reported to Ohio EPA. In December 2003, Ford resolved the matter with Ohio EPA through an administrative settlement that included a nominal penalty.

      Cleveland Casting Plant Notice of Violation. Following an inspection by the Cleveland Local Air Agency, our Cleveland Casting Plant received a notice of violation in July 2002. The NOV alleged that the Plant exceeded a number of its permit limitations, modified its emission sources without first obtaining a permit to install, did not operate certain process equipment according to permit requirements, and did not conduct required emission testing. In December 2003, Ford resolved the matter with Ohio EPA through an administrative settlement that included a nominal penalty.

      Wixom Assembly Plant Notice of Violation Regarding Air Emissions. In September 2003, the Department of Environmental Quality (the “DEQ”) notified Ford that it is commencing an enforcement action related to several abatement equipment malfunctions at our Wixom, Michigan Assembly Plant over the last few years. The DEQ alleges that the plant did not properly follow state air rules governing abatement equipment malfunction. We are negotiating the terms of a malfunction abatement plan with the DEQ that will be included in the Plant’s operating permit. It is reasonably possible that the DEQ could seek monetary sanctions of $100,000 or more for these alleged violations.

Class Actions

      The following are actions filed against us on behalf of individual plaintiffs and all others similarly situated (i.e., purported class actions). In light of the fact that very few of the purported class actions filed against us in the past have ever been certified by the courts as class actions, the actions listed below are limited to those that (i) have been certified as a class action by a court of competent

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jurisdiction (and any additional purported class actions that raise allegations substantially similar to a certified case) and (ii) if resolved unfavorably to the Company, would likely involve a significant cost.

      Firestone Class Actions. Over 100 Firestone-related class actions have been filed against us, but many have been consolidated into a single case now pending in federal court in Indianapolis. Plaintiffs in these cases have never been injured in an accident involving Firestone tires, but they seek to recover, on behalf of all purchasers of Ford Explorers with Firestone tires, the alleged diminution in vehicle value caused by the use of those tires or by the alleged instability of Explorers. Plaintiffs also seek punitive damages.

      In the case pending in Indianapolis, the United States Court of Appeals for the Seventh Circuit has ruled that the case cannot be maintained as a nationwide or statewide class action. Plaintiffs are now focusing on some of the 23 cases that have not yet been transferred to Indianapolis. These cases were filed in state courts in Illinois, Pennsylvania, South Carolina (2 cases), Wisconsin, Arkansas (2 cases), California (5 cases), Louisiana, Ohio, Texas (2 cases), Connecticut (5 cases), Florida, and Tennessee. Some of these cases have been removed to federal court and are likely to be transferred to the court in Indianapolis, where they will be subject to the Seventh Circuit’s order denying class certification. Some of these cases, however, will remain in state court where the trial courts will be free to reconsider the issue of class certification. A state trial judge in Arkansas has dismissed one of the cases pending in that state because plaintiffs suffered no injury.

      In the case filed in Illinois, and in one of the cases filed in South Carolina, the trial courts have already certified statewide classes. In those cases, however, plaintiffs are not relying on any alleged defects in the Ford Explorer; rather, they allege only that Firestone ATX and Wilderness AT tires installed on Ford Explorers and Mercury Mountaineers are defective. Since we have already agreed to replace all of these tires, we are seeking to have these cases dismissed as moot. We will also be seeking appellate review of these rulings.

      On June 20, 2003, the U.S. Court of Appeals enjoined the prosecutions of state cases that purport to represent a nationwide class on the basis that the court’s prior decisions establish conclusively that these cases cannot be tried as nationwide class actions. State cases that involve only statewide classes are unaffected by the June 20 decision, but are likely to be stayed pending completion of a settlement that Firestone has tentatively negotiated with the plaintiffs. The proposed settlement would require plaintiffs to dismiss all class action claims against Ford that are based on alleged tire defects.

      Paint Class Actions. A purported class action in state court in Illinois asserts claims on behalf of residents of all states except Texas who have experienced paint peeling on most 1988 through 1997 model year Ford vehicles. Plaintiffs allege fraud, breach of warranty, and violations of consumer protection statutes, contending that their paint is defective and susceptible to peeling because we did not use spray primer between the high-build electrocoat (“HBEC”) and the color coat. The lack of spray primer allegedly causes the adhesion of the color coat to the HBEC to deteriorate after extended exposure to ultraviolet radiation from sunlight. Plaintiffs seek unspecified compensatory damages (in an amount to cover the cost of repainting their vehicles and to compensate for alleged diminution in value), punitive damages, attorneys’ fees and interest. On September 15, 2003, the court certified the class of owners of 1989-96 model year vehicles that have experienced paint peeling (all states except Texas). We will seek leave to appeal this order.

      A second purported class action, filed in Texas state court, involving essentially the same allegations was settled for a nominal amount following reversal by the Texas Court of Appeals of the trial court’s order certifying a class.

      Ford/Citibank Visa Class Action. Four purported nationwide class actions and two purported statewide class actions are pending against us in connection with the June 1997 announcement of the termination of the Ford/Citibank credit card rebate program; Citibank is also a defendant in some

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of these actions. The actions allege damages in an amount up to $3,500 for each cardholder who obtained a Ford/Citibank credit card in reliance on the rebate program and who is precluded from accumulating discounts toward the purchase or lease of new Ford vehicles after December 1997 as a result of the termination of the rebate program. Plaintiffs contend that defendants deceptively breached their contract by unilaterally terminating the program, that defendants have been unjustly enriched as a result of the interest charges and fees collected from cardholders, and further, that defendants conspired to deprive plaintiffs of the benefits of their credit card agreement. Plaintiffs seek compensatory damages, or alternatively, reinstatement of the rebate program, and punitive damages, costs, expenses and attorneys’ fees.

      The four purported nationwide class actions are pending in state courts in Alabama, Illinois, New York, and Washington, and the purported statewide class actions are pending in California state courts. The Alabama court has conditionally certified a class consisting of Alabama residents.

      Crown Victoria Police Interceptor Class Actions. A total of 23 purported class actions have been filed on behalf of government entities that own Ford Crown Victoria Police Interceptors, alleging that the vehicles are susceptible to fuel leaks and fires when struck from the rear at high speed. Twenty of the actions have been consolidated into a Multi District Litigation (“MDL”) proceeding in the U.S. District Court, Northern District of Ohio. The remaining actions are pending in Illinois (2 cases) and California. Five of the cases purport to represent a nationwide class; the other cases purport to represent statewide classes. The complaints seek a recall of the affected vehicles, an injunction, compensatory and punitive damages and other relief. A state court in Illinois has certified a state-wide class of all municipalities in the state of Illinois that own 1992-2002 Police Interceptor vehicles.

      Six additional purported class actions relating to non-police Ford Crown Victoria vehicles, with similar allegations and demands for relief, have been filed in Arkansas, Illinois, Ohio, California, Florida, and Texas. The Arkansas and Ohio cases purport to represent a nationwide class; the others purport to represent owners in the relevant state.

      F-150 Radiator Class Actions. Three purported class actions are pending alleging that the Company defrauded purchasers of approximately 400,000 1999-2001 F-150 trucks by falsely representing that certain option packages included “upgraded” radiators. In one case, in state court in Texas, the trial court has certified a nationwide class of all purchasers of 2000 and 2001 F-150 trucks with heavy duty or trailer packages. We are appealing that ruling to the Texas Court of Appeals. Cases in South Carolina and California purport to represent statewide classes. Prior to the filing of these suits, we implemented a program that gives affected customers a choice of $100 cash, a $500 coupon, or installation of an upgraded radiator. However, plaintiffs’ are alleging that the program should cover additional vehicles, that they should be reimbursed for loss of use of the vehicle while the radiators are being replaced, and that they are entitled to attorney fees.

      Hydroboost Truck Brake Class Action. A purported class action was filed on August 2, 2002 in state court in Oklahoma on behalf of all purchasers of 1999 through 2002 model year F-250, F-350, F-450, and F-550 Ford Super Duty Trucks and 2002 Excursions with hydroboost hydraulic braking systems. The complaint alleges that these trucks are unsafe because they suffer diminished power assist to the steering when the driver is simultaneously braking and steering. The complaint alleges breach of warranty and fraud, and seeks the cost of retrofitting the trucks to eliminate the alleged danger, compensation for diminished resale value, and other relief. On January 19, 2004, the court granted plaintiff’s motion to certify a nationwide class, and agreed to stay proceedings while we appeal. The Safety Administration investigated a similar issue and closed the investigation, finding that “diminished steering assist while braking is present” in these trucks, but that the “associated injury and property damage incidents are so rare that they do not present a risk to vehicle safety.”

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      Not required.

      Our executive officers and their positions and ages at March 1, 2004 unless otherwise noted, are shown in the table below: