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Ford Motor Company (NYSE:F)

March 2008 U.S. Sales Results Call

April 1, 2008 1:00 pm ET

Executives

George Pipas – US Sales Analysis Manager

Emily Kolinski Morris – Senior Economist

Jim Farley – Group VP Marketing and Communications

Analysts

John Murphy – Merrill Lynch

Chris Ceraso – Credit Suisse

Rod Lache – Deutsche Bank Securities

Himanshu Patel – J.P. Morgan

Chris Woodyard – USA Today

Sarah Webster – Detroit Free Press

Bryce Hoffman – Detroit News

Amy Wilson – Automotive News

Bill Koenig – Bloomberg News

Operator

Great day ladies and gentlemen and welcome to the Ford monthly sales conference call. My name is Ms. Katina and I will be your coordinator for today. (Operator instructions). I would now like to turn the presentation over to your host for today’s call, Mr. George Pipas, please proceed.

George Pipas

Thank you Katina and welcome everybody to the March sales conference call. Joining me today as usual is Emily Kolinski Morris and also is as our custom has been this year, Jim Farley, Ford’s Group Vice President Marketing and Communications is with us today. I’ll start with a few comments about the industry, what’s going on in the industry with regard to segments and just the brief headline numbers in Ford sales results. Emily will give you an economic update and then we’ll turn the call to Jim and after that we’ll begin our Q&A session.

It would appear overall demand in the industry this month is resulting in a SAAR that will give us a light vehicle sales rate around 15 million. And this puts the year to date light vehicle SAAR in the low 15 million range which is within the boundaries that we articulated back on December 1st as it relates to our expectations about how light vehicle sales would play out in the early part of this year. I just mentioned it would appear to us as though this is the lowest industry sales for the month of March since 1993.

Let’s look at industry sales by segment and I know this sounds like a broken record but again in March just as in February and January and in 2007, small and mid-sized cars are growing, not only in terms of their percentage of the total industry market, but also in an absolute sense. And you can see that in kind of a weak economy that we’re operating in, to see sales growth in categories is quite impressive. Joining small and mid-sized cars, as you know that crossovers are also growing. Whereas trucks and traditional truck based sport utility vehicles are weaker.

Just want to comment a little bit on the small cars segment. You know in 2004 industry wide sales of small cars accounted for 14% of total industry sales in the United States. They grew 1% a year and last year in 2007 that put them at 17% of total industry sales. This year so far, small car sales are up 2% compared with the first quarter of 2007. So I think my bottom line takeaway right now is the pace of segment shifts is accelerating in 2008.

Let’s look at the other end of the vehicle spectrum, the full size truck segment. At its peak in 2004 and 2005, the full sized segment accounted for 15% of total sales. If you go back to the early 90’s, the full sized truck segment was 9% of total industry sales. Today, in the first quarter, the segment is about 12% of total industry sales, about halfway between where it was in the early 90’s and the 2004 and 2005 peak. How about this, today industry wide sales of CUV, crossovers are almost double the sales of SUVs. At the beginning of the decade, CUVs were little more than an niche segment and that year SUVs outsold CUVs by 6:1. What a turnaround over this period.

With regard to Ford sales and I’ll just mention that we’re also seeing some power train shifts as well. The most obvious examples probably are in the four cylinder area where well of course the Focus is a four cylinder model, but even among products where consumers have choices, we’re seeing the four cylinder mix in the Fusion at about 70%, compared with somewhat less than 60% a year ago at this time. The Milan, a similar story, where the midsize car has a somewhat lower four cylinder rate than it does on the Fusion, but still much higher than a year ago. We’re seeing this on Ranger, we’re seeing this on the Mariner, the Mariner sport utility vehicle. So it’s pervasive in the sense that you can see it in almost every area.

Ford results as you can see from our sales release are down 14% overall. Just hasten to point out that we do not adjust for the difference in selling days at Ford. I’ll just let it go at that. These are unadjusted numbers, you can easily calculate the percentage. Within that retail sales are down 17% and it’s noted in the release that all of the decline in the retail sales this month is in the truck and the SUV area. Where cars and crossovers together are about flat compared with a year ago, cars are down just a little bit at the retail level with CUVs being higher.

Focus is playing a big role in the contribution that we’re getting from our car lineup as are the midsized cars, Fusion and Milan and the Lincoln MKZ but Focus can’t go without mention because not only are its retail sales up 36% in March, 35% for the first quarter. And this is so important now it’s our lone car, small car entry and last time Jim talked about the important of this category, how large it was and how important it was in the first time buyer market. The new buyers are younger and also they’re equipping their cars, they’re not just looking for cheap transportation, the transaction prices are higher, I think Jim’s going to comment on that. And obviously Sync is playing a big role. I learned today that we’re now over the 100,000 sale market with the Sync equipped products. So that’s kind of a milestone for that popular feature.

Crossovers continued to be strong. Edge is noteworthy with a 35% increase in retail sales and in the first quarter over 50% higher than its introduction quarter last year. But Mariner, MKX and Escape also contributed to our crossover results. I’m going to call balls and strikes here, I already mentioned that you might expect to see sport utility vehicles down, they were. The four models taken together, Explorer, Expedition, Mountaineer and Navigator were down 24% in total.

Truck sales which includes the Ranger, the only truck model that was higher again, still truck sales were 25% lower, so SUVs and trucks both showing year to year declines of over 25%. I mentioned that retail sales were down 17%, notwithstanding the softness in the economy, we continued to maintain our strategy and our phase down in the daily rental market. Daily rental sales were down 13% compared with a year ago in the month. That means that for the quarter, incidentally, daily rental sales were down 16%, already from a much reduced level last year, so 16% down on daily rental in the first quarter. As it turns out, commercial fleet and government sales, much of which you see in the Ford F Series and Econoline area were up 5% for the quarter.

Inventories, lower than February. The inventories for the month, let me just give you the car truck split as well. We’re 166,000 in cars, 396,000 trucks for a total of 562. That’s down 34,000 units from the end of February and 11,000 units against the month of March. I think the point that I want to make at this juncture is that we’re not letting this industry get away from us. We have several times reiterated our intentions to monitor consumer demand, adjust production accordingly, sometimes we meet more than once a month to do so. But we are absolutely determined now to let the industry get away from us because of the important of maintaining our inventory levels at an appropriate level in order to drive the virtuous circle and to drive our recovery plan.

So with that in mind, I’m going to stop for now, turn it over to Emily, she’s got lots of news to share with you and just came in on a plane from San Francisco where she spoke with a group of peers and Emily why don’t you take over.

Emily Kolinski Morris

Okay, great, thanks so much George. Well let’s start with a quick recap here of what’s transpired in the economic data since our last call. We’ve seen a decline in payrolls, a sharper reduction in home prices, weaker consumer confidence and spending. And in a more promising development, a slight reduction in core inflation as measured by the deflator for personal consumption expenditures and that’s one of the Federal Reserve’s preferred measures of inflation. And of course we can’t forget the averted collapse of Bear Stearns and the associated financial market volatility over the past two weeks. Although, it is hard to believe that’s it’s really just over two weeks now since that news broke.

While all of these issues have their own significance engaging the economic outlook for the year, the factor that really ties them altogether is the elevated level of uncertainty that’s now imbedded in the marketplace. Consumers who are unsure of their employment and financial outlook are unlikely to invest in a significant purchase, such as a new home or vehicle. Businesses facing an uncertain demand environment for their end products are unlikely to invest in new capacity. And banks and other financial institutions are less likely to lend money to fund these activities or will demand a higher premium to do so.

So trying to plan in such an environment, we simply have to take it one month at a time. But with the very early March estimates as George indicated, around 15 million units for light vehicle sales, the first quarter average will probably still hit the low end of our previously stated guidance in the first half, which was 15.2-15.7 light. But we all recognize the uncertainty facing us here in the second quarter. The outcome for the full year is going to depend materially on what transpires in these coming months.

Now as we discussed previously, there’s already significant policy stimulus in the pipeline and that’s only been augmented by the interest rate and other liquidity actions taken by the Fed since our last call. However, we are not banking on a substantial recovery and there’s still the potential that the sales track could be coming off of a lower than expected based as we enter the second half of the year. I’ll leave it at that for now, George and turn it back over to you.

George Pipas

Well and I’m going to toss it to Jim. Jim, why don’t you take over the…

Jim Farley

Thank you. I guess we have been fairly repetitive and consistent with previous calls, no doubt it’s a very challenging market. And I’d like to be able to tell you that the worse is behind us but I really can’t give you that assurance. As Emily indicated we too think there’s a lot of uncertainty around all the issues, especially the credit availability for consumers. And at this point our sense is that the next quarter, the second quarter of the year may be our most difficult of the year. And with that in mind, all the management team in North America is so focused on maintaining our discipline, staying focused on our four point plan, especially the element of structuring our business and our availability in line with demand.

As George mentioned, we get together and are making decisions on a weekly basis about availability and production. We’re realistic. We’re frankly not taking an optimistic approach and we view demand and adjust production accordingly. And the challenges that we see go beyond even the economic and credit areas. Obviously high gas prices and also a growing interesting development is the cost of diesel and the mix shift to smaller vehicles is a significant impact on us. And frankly we’re in a much better position at Ford to compete with those shifts than we were just a few years ago.

In the first quarter and George went through all the numbers but I’d like to highlight a couple of key elements now that we’re closing the quarter. Cars and crossovers account for 54% of our sales in the first quarter. In March, that was almost at 60%, 57%. To give you an idea, that is an 8 point shift in one year. And compared to 2004, just a few years ago, again March was 57% cars and CUVs, we were at 30% just a few years ago. I mean that is a wholesale change in the type of products we’re selling. And of course Focus and Fusion and Edge are really helping us compete in this new vehicle market. But frankly the shift puts a lot of pressure on our market share.

Just to give you an idea, every percentage decline in the full sized pickup truck segment, as a percent of the industry, is three-tenths of market share for Ford Motor Company. So that, our strong performance in full sized truck and in SUVs really requires us to make up in the other vehicles, thankfully newer vehicles, that market share challenge. And I’m really happy to report that Ford Lincoln and Mercury market share in the first quarter is at about 15% share. That’s well above our year share objective. And it is actually almost on par with last year at 15.1%.

The market is shrinking or changing and yet Ford has been able to maintain our overall market share. And I’m really proud of our dealers and of our marketing and sales teams. You know, I’ve never worked as hard as I have for the last three months and my team is so committed. Every sale counts for us. And in these tough situations we’re very encouraged by what we see, as George mentioned, by Focus and Edge. We sold 21,000 Focus’s last month. That is an incredible transformation for a company that not too many years ago was so focused on trucks and SUVs. And we feel that now we’re starting to push the right buttons with features and products the customers really want. And that’s the basis for our optimism as we approach the launch of several new products in the second half of the year. And that’s where our optimism for the second half of the year comes form is those new products.

Talk about Focus and George mentioned the younger buyer. And you know from my [sign] experience it’s another example of young people buy cheap transportation not being true. The average Focus now and equipped with features like Sync, the average new Focus this year has $2,000 more transaction price than just a year ago. And we’re getting more young customers every time, every month ends. And that is a real big surprise and I think a surprise for even some people within Ford Motor Company that we’re gaining share in the most competitive segment in our industry.

And by the way the version 2 Sync is coming in the quarter so we’re not done with Sync. And on Edge, George mentioned this, I know we’re a broken record but we are really proud of what Edge has done, it’s really growing consideration for the company. It’s a great transitional product out of our traditional SUVs into cars and CUVs. And in the first quarter, Edge sales are up 36% retail. And you know what’s really interesting for us is to see the transition geographically. In the current quarter, only 25% of our sales came from the Great Lakes region. 36% came from Great Lakes just the first quarter of last year. So that’s a pretty significant jump.

And in California, California now accounts for 10% of our Edge sales. And as well as the regions bordering around the East Coast. Put another way, the Great Lakes, for Great Lakes, Edge retail sales grew 22%. Sounds pretty good. But California retail sales more than doubled. And the same is the case for the Northeast and we’re really encouraged about what’s happening in the Southeast, the Southwest for Edge. And again this is really an important lesson for Ford as we go to market with our new products like Flex.

There’s a lot of other shifts that are happening. George mentioned four cylinder. I think we’re also seeing a shift in full size truck diesel. Huge shifts in geographic parts of the country. All the housing pressured markets like Atlanta, the Carolinas, Orlando, Denver, Phoenix, LA, all those markets are taking almost all the brunt of any decline in full sized truck and SUV. And actually we’re growing certain other parts of the country like the Southwest. And we’re also seeing significant pricing shifts in certain segments. With that I’ll turn it back over to George.

George Pipas

Okay, thank you Jim and Katina if you could begin the Q&A portion of our call for us, we’d appreciate that.

Question-and-Answer Session

Operator

(Operator instructions). Your first question comes from the line of John Murphy representing Merrill Lynch, please proceed.

John Murphy – Merrill Lynch

[Unintelligible].

George Pipas

If I could ask you to get back on the line, I think you’ve got your cell phone is really causing a lot of static, I can’t hear you.

Operator

Your next question will come from the line of Chris Ceraso representing Credit Suisse, please proceed.

Chris Ceraso – Credit Suisse

Thanks George, can you hear me? Okay, good. I’ve got two questions. First for Jim, you mentioned the increase in transaction price on the Focus, that’s exactly what I wanted to talk about, the shift in the mix, car versus truck and some of the power train shifts, I think you know how profound the profit effect of that can be. Can you give us some more details maybe on the Edge for example, what the year to year change in transaction prices looks like or any other areas where from a content or a price standpoint you’re going to be able to offset some of that negative mix shift?

Jim Farley

Sure Chris. I have to say the biggest impact for us on the shift is really on the cost side. And Mark Fields and the entire North America team is so focused on our cost reduction efforts and really getting again our business right sized for the new business scope. And I think Mark and his team could take you through that separately.

On the transaction price we are seeing a couple of things happen. First of all the higher end grades on Focus, Fusion and Edge, Mariner, Escape, all the popular products, we’re seeing a lot higher demand. People move down into these products, they’re bringing with them a preference for higher end equipment. So not only are they moving into higher end grades but they’re also buying optional equipment. We’re seeing for example, Sync, the days to turn on Sync continue to be 10 days or more faster with Sync than without Sync. And it goes beyond that to a lot of higher end features. I’d love to give you the specifics on Edge and maybe we could do that offline but I will tell you that we are seeing a mix shift in a positive way and that is definitely helping us.

The other thing that’s helping us is on incremental volume. You know Focus, we’re building every Focus we can right now. And we didn’t anticipate that incremental volume in our business cases. Sure it’s not the contribution margin of the full sized truck but the incremental volume is really helping us. But I think the most impactful part of that is really our cost reduction efforts and Mark and his team are leading.

Chris Ceraso – Credit Suisse

Okay, that makes sense and the second question was on what’s going on in terms of financing, do you have any color on subtle changes in the length of the term, are you sort of pushing people towards shorter terms, are you pushing people towards higher loan to value or rather more equity into the car or people of comparable credit from last year now at higher rates, any changes in credit?

Jim Farley

Chris it’s a really good question. We are seeing actually quite a bit of shift in the credit and Ford Credit can give you more information. Just at 50,000 feet a couple big observations. Number one, leasing has become much more popular. Year over year, leasing is for the industry and especially for the car brands, we’re seeing a very meaningful shift and that is very interesting from what does that mean from a risk scenario as those vehicles come back to market in a few years.

But we are seeing a pretty significant shift. That is partly due to the shift in car and CUV demand which is parts of the country that are more lease oriented. And as well for us, the popularity in leasing is becoming a trend because of our improved resale values and residuals, so our lease payments are becoming more and more attractive. And those are in our most popular vehicles, like Edge and Escape.

In terms of the number of, the terms, have not seen a big shift in that. I mean we saw that a couple years ago when people went to 60, 72 and even longer contracts. The real issue is can people get financed or not? And that I think, our finance departments in our dealerships have never been busier trying to get people together. Not as much an issue in the new car departments as the used departments. Used is where we see a lot more marginal customers and for them and as a whole we are shifting our incentive dollars to more of a retail offer for a lot of reasons.

But we think that that’s an opportunity for us. And obviously as interest rates comes down the APR message is not as impactful, more impactful in the super duty truck for example but less impactful across the line. We’ve done zero for 60 on F Series and the marginal improvements for that an impact has not been as great as we thought. We do have a lot of variance of offer now across the country and I think that’s the most important thing for us right now is to try different things in different markets and learn and stick with those programs. But I would say 50,000 feet leasing, big trend and credit issues of just being able to finance people on the used market.

George Pipas

Okay, thank you Chris for participating and new question Katina.

Operator

Your next question will come from the line of Rod Lache representing Deutsche Bank, please proceed.

Rod Lache – Deutsche Bank Securities

I was wondering how closely you’re watching used car prices and you know what maybe some of the more recent trends would be with consumers that have negative equity in their trade ins at dealerships. And also on George your comment about the full sized truck being 9% of the market in the earlier 90’s, just share your thoughts maybe on why it wouldn’t go back down to that level or what you think is the trajectory of that segment.

George Pipas

Well, both of those are good questions and as a matter of fact I noted in your research report leading up to the sales call, Rod, the comment about used value for a full sized utility versus a compact utility and Jim will pick up on that.

With regard to the full sized truck market, I think that where the full sized truck market wants to be is probably in the 11-12% range right now. I don’t see it going back to the 8-9% range where it was in the 1990’s. For one reason is, is that back in the early 90’s, the full sized trucks were about 80% a single row of seats, I mean it was a standard cab for 80% of the models. There were very few extended cabs. Now with the extended cabs, you know we see that the product can be used in a lot of different applications, including different work applications where you want to carry a crew of workers.

But I think our feeling right now is is that the days of the 15% share of the total industry we will not likely see something approaching that unless it was just on a short term kind of a basis. Probably something closer to the 11-12% range, about midway between where it was recently and where it was a long time ago is the area that we’re planning is that where we’re looking at right now. Okay, now as far as the resale values…

Jim Farley

Rod it’s a really good question. Absolutely everyday we’re watching the [Manheim] Index and all the auction values. It’s probably one of the biggest topics of discussion with our dealers. And of course with our credit company. We have seen a significant negative trend on full sized pickup and medium and full sized SUV. Although I have to say it hasn’t from the standpoint of trade in value in the dealership and putting deals together, what we see so far is that in the geographies where customers are more under pressure, we have seen some effective programs going to more cash to help the customers with their trade in value.

And those are the kind of regional variance of why we’ve gone to regional marketing, so we can make those adjustments and use our incentive dollars more intelligently across the country where we see differences in customer profile. And so in the Carolinas and Orlandos of the world, we are starting to see the effectiveness of those programs where we give the customer a little bit more cash which they can use for the trade in value in the equities.

George Pipas

Thanks Jim and next question Katina.

Operator

The next question comes from the line of Himanshu Patel representing J.P. Morgan, please proceed.

Himanshu Patel – J.P. Morgan

I’ve got just two questions, one could you give a little bit of data on incentive trends in the month and then also talk about the exit rate of sales in March.

George Pipas

It was fairly uniform Himanshu. I mean we closed the month strong but that’s oftentimes the case where we see a pickup in the receipts from dealers towards the end of the month. I don’t think anything that was, I mean we felt good about our close but I think we had a good sense of where the month was going to come out for both Ford and the industry right from the get go. It was pretty much as people were advertising beginning with the first J.D. Power report after the first ten days.

With regard to incentives, our incentive spending was down in March a little bit from February. Up by a little bit, I mean really we’re not talking about anything significant, compared with a year ago. I think it’s fair to say that we continued to see some you know higher levels of spending on many of the Asian manufacturers, that doesn’t come as a total surprise, it’s consistent with what we have seen. But generally, generally somewhat lower and somewhat lower incentive spending compared with February Himanshu. We haven’t analyzed it fully but it could be due as much to mix you know as the trucks segment declines it share of industry, that provides somewhat lower levels of overall spending on the average, in the aggregate. We’re still analyzing that and figuring it out, so that’s what I have to offer at this point.

Himanshu Patel – J.P. Morgan

Could I just sneak in one more, you mentioned earlier that you guys were thinking second quarter sales would be probably the toughest quarter of the year, I’m just wondering what sparked that comment, was it something that you saw in the month of March or you’re just broadly observing economic indicators outside of your own business?

George Pipas

I’m going to ask Emily to just comment on that okay.

Emily Kolinski Morris

Yeah Himanshu I think it’s more the latter, as George indicated March didn’t really generate any significant surprises in terms of the sales track but we did have as we mentioned the significant upheaval in financial markets over the past couple of weeks. And the reaction that is still ongoing from policy makers and lenders to those developments is kind of the biggest factor that changed our outlook for the second quarter.

Jim Farley

And of course that’s the outlook for the market, I have to say, basically being flat on share year over year I think bodes well for us and the way we’re running our business as we go into the second quarter. And then for us obviously as we hit Flex and some other new vehicles in the second half, that’s where we think we have opportunity as a company.

George Pipas

Okay and Katina now let’s switch the questions to the journalists and we’ll come back to analysts if we’ve got time, okay.

Operator

Yes sir. Your first question will come from the line of Chris Woodyard representing USA Today, please proceed.

Chris Woodyard – USA Today

Hey, two quick things. One, Mercury, it looks like it took a bashing for the month and hasn’t been doing that well for the quarter, are you guys just letting that go or is there any plans to rollout a campaign for that brand?

Jim Farley

You know to be honest we have some pretty significant product investments in Mercury coming in the second half of the year. We have a whole new power train for Mariner and we have a significantly revised Milan with a hybrid, so to be honest that’s just a calendarization thing from our standpoint. We do have a lot of marketing plans for Mercury and especially to take advantage of those product investments we made.

George Pipas

Yeah and Chris I might just point out before we leave that topic that at Lincoln and Mercury, they took most of the brunt of the decline in fleet sales, so the total sales comparisons look like they’re more onerous on a year to year basis or more aggravated on a year to year basis but the retail sales comparisons really for Mercury and Lincoln were in line with what we saw at the Ford division but the strong, you know the relatively strong commercial fleet and that we saw on the truck side of the business primarily in the commercial area, that helped the Ford comparison a little bit and certainly you know wouldn’t have helped a product like a brand like Lincoln where fleet sales due to the lower town car sales mostly were down 50% for the brand. So retail sales were basically in line among all three brands.

Chris Woodyard – USA Today

Excellent and Jim you mentioned the second quarter looks like it might be difficult but those rebate checks are going to be coming out. And I didn’t know if you think that might give you a boost or what your plans are to take advantage of that?

Jim Farley

Great question Chris. We actually have been, we have a team working on how to take advantage of that from a kind of advertising merchandising standpoint. I would say it’s just too uncertain for us to call what the impact will be on vehicle going, you know and Emily can comment better than I can but you know we really have not counted on that to be a significant impact in the second quarter. We think that there are a lot of other things we can do to improve our performance but that’s at this point, that’s not a center point of any campaign. Frankly in the coming days and weeks we’ll be launching another marketing effort that to us is more fundamental than relying on the government and that’s really to highlight what’s happening with Ford Motor Company and the things were doing positively. Emily, I don’t know if you have…

Emily Kolinski Morris

Yeah, just to add on to that Chris. Surveys of what consumers intend to do with the checks at this point indicate they’re probably going to spend about 25% on average. Another 40% or so will go to bill payment and the rest will go to savings. So with those kind of amounts as Jim said, it’s good to be conservative in terms of what kind of boost we may get. There’s certainly the opportunity to take advantage from a marketing perspective of the cash that consumers are going to have available to them but consumers are also being cautious and so we don’t think there’s going to be a huge burst of spending at least right of the bat when the checks come.

George Pipas

Okay, next question Katina.

Operator

Your next question will come from the line of Sarah Webster representing the Detroit Free Press, please proceed.

Sarah Webster – Detroit Free Press

My question has to do with the Ford Focus, you mentioned that they’re selling like crazy and I wonder if you could talk a little bit about the inventory and days to turn for that vehicle? And also Jim had mentioned some regional color about the Focus in California, I guess if you could just generally give us an idea of nationwide how this vehicle is selling?

George Pipas

Okay, I don’t have days to turn exactly. All I know is that the car is selling to the point where frankly each month we have to revise upward our expectations. And as Jim mentioned earlier, we’re going as hard as we can at Wayne on the production standpoint, there’s just nothing being left on the table at Wayne Assembly. You know it becomes a little problematic in a way because with the growth that I mentioned earlier in the small cars segment and the success that this product is having in the segment, the days supply as we enter the spring selling season is going to, well, I don’t think it’s going to slow us down to the point where we see declines in the product year over year but you know we may not be able to reach the full potential here in the spring selling season. We’re just going to lean on it as much as we possibly can. Jim on a regional basis what are we seeing?

Jim Farley

Sarah, thank you for your question, a couple observations. First of all, we do see opportunity on the type of Focus’s we’re selling. We’re really working hard to catch up on the type of grades and option equipment that we’re building of the vehicles that we’re building at Wayne. So probably the biggest shift for our, other than finding a way of squeezing more out of Wayne is really what we’re building. A couple observations regionally, the really hot places where Focus has surprised us is in the Northeast and in Texas and the Southwest.

Those are the places where we’ve seen either our forecasting wasn’t right or the markets are hotter for this type of segment shift. But the Northeast were consistently 20-30% above our objectives, above what we thought, above where our share was going to be. And interesting in the Midwest, the anomaly is really the Chicago region where we continue to do very well with Focus. And then really the heart and soul of our increase or surprise has been in the Southwest region, especially in Texas which was a really strong month for us in March and frankly was up year over year, believe it or not. In total the Focus was a key product for us in the Southwest.

George Pipas

Sarah, similarly to the Edge where the gains outside of our traditional areas of strength have been in the coastal areas and in other markets. I’d just point out in the sales release it mentions that retail sales in the first quarter are up 35% for the car. And the Great Lakes which is that area where we have been strong, the growth is up but it’s only half as much as in the rest of the nation. So there again this new product is getting to areas and making a statement in some regions where we’re looking to increase the awareness and consideration of our brand and our products. Next question Katina.

Operator

Your next question comes from the line of Bryce Hoffman representing the Detroit News, please proceed.

Bryce Hoffman – Detroit News

My question is for Jim, Jim you guys appear to be taking a very kind of sober and realistic look at the market, do you still think, A, you’ll be able to meet your goal of returning to profitability in 2009 with these market conditions and, B, are any more capacity actions anticipated given where you see the market going?

Jim Farley

Well Bryce as you know our build on the truck side is below last year. And we have been very disciplined about our production. We are you know as we go into the third quarter, especially on F Series, we will carry a little bit of higher days supply just because we have to get ready for the ramp up of the new truck. And you know that’s already kind of factored into our plan. As far as next year’s profitability, I mean that’s Mark and his team and the whole North America team is working tirelessly on that.

And we are absolutely 100% committed to that plan. And we will continue to manage our business. You know does it make it challenging, yeah. But we see opportunities all over the place where at least in my area, the sales and marketing side, we can contribute to that goal. And I know how hard Mark’s team is working on the other parts of the business. But I’d encourage you to follow up with Mark but we will not waiver from that commitment.

George Pipas

Okay, next question Katina.

Operator

Your next question will come from the line of Amy Wilson representing the Automotive News, please proceed.

Amy Wilson – Automotive News

Hello, I wanted to follow up with Jim on the second quarter comments that you made. If the SAAR for the industry is around 15.2 for the first quarter and now that you’re expecting the second quarter would be lower than anticipated, what are you looking at for the first half? I mean I would assume it’s no longer a range of 15.2-15.7.

Jim Farley

You know Amy at this point I think all we can say is there’s a lot of uncertain factors. You know we gave a range for that reason. We think it’s, you know where we’re landing is kind of on the lower side of that range. You know we’re looking at it every week, every day and at this point in time I think there’s too many uncertainties to, uncertain factors to call it differently than our range. Emily do you have any comments?

Emily Kolinski Morris

No I think you know as I indicated in my opening remarks, we certainly see the potential that the second quarter could be coming off a lower base than what we have in the forecast but as Jim indicated, something that we look at on an ongoing basis and we’ll let you know when we’ve got an official update to that.

George Pipas

Okay, thank you Amy. Katina let’s just take one more question and then we’re going to have to call it an afternoon.

Operator

Okay, your final question will come from the line of Bill Koenig representing Bloomberg News, please proceed.

Bill Koenig – Bloomberg News

Hi, good afternoon. In the call, consumer issues or credit issues with consumers has been referenced. What about credit issues concerning Ford’s own ability to extend loans to customers. I mean I know Ford Credit handles that but I figured you guys work with that, how is the tightening credit markets affecting that end of things?

George Pipas

I guess the first question or the first response I have Bill to that is I think it’s a good question. Obviously it’s important to us and I think it’s a discussion that’s probably best kept for the first quarter earnings call which will just be three weeks from now. You know, Ford Credit continues to secure financing to fund its dealers and you know we’re well positioned by the actions we took some time ago to finance people that want to drive Ford products.

But a more detailed discussion or to go any further than that, I think it would be a great question to surface up in conjunction with Q1 earnings. Okay? Okay, Katina, thanks again for doing such a great job facilitating our call. I want to thank everybody for participating, we had good discussions. John Murphy if you’re still on the line I’m sorry I didn’t get back to you because of the time allotment. But your phone was kind of scratchy, it sounded like you were in the Holland Tunnel or something. So with that I’ll bid everybody adieu and look forward to talking to you in the coming month. Bye.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference, this concludes your presentation, you may now disconnect. Good day.

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Source: Ford Motor Company March 2008 U.S. Sales Results Call Transcript
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