Ford Motor Co F
Q1 2013 Earnings Call Transcript
Transcript Call Date 04/24/2013

Operator: Good day, ladies and gentlemen, and welcome to the Ford First Quarter Earnings Conference Call. My name is Janeta and I will be your operator for today. At this time, all participants are in listen-only-mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Mr. George Sharp, Executive Director, Investor Relations. Please proceed, sir.

George Sharp - Executive Director, IR: Thank you, Janeta, and good morning, ladies and gentlemen. Welcome to all of you who are joining us today either by phone or by webcast. On behalf of the entire Ford management team, I'd like to thank you for taking the time to be with us this morning, so we can provide you with additional details of our first quarter 2013 financial results.

Presenting today are Alan Mulally, President and CEO of Ford Motor Company and Bob Shanks, Chief Financial Officer. Also participating are Mark Fields, Chief Operating Officer; Stephen Odell, President, Europe, Middle East and Africa; Stuart Rowley, Corporate Controller; Neil Schloss, Corporate Treasurer; (Paul Andonian), Director of Accounting; and Mike Seneski, Ford Credit CFO.

Now, before we begin, I'd like to cover a few items. Copies of this morning's press release and the presentation slides that we will be using have been posted on the Ford's investor and media website for your reference. The financial results discussed today are presented on a preliminary basis. Final data will be included in our Form 10-Q that will be filed early next month. The financial results presented are on a GAAP basis and in some cases, on a non-GAAP basis. The non-GAAP financial measures discussed on this call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide deck.

Finally, today's presentation includes some forward-looking statements about our expectations for Ford's future performance. Of course, actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are summarized at the end of this presentation. These risk factors and other key information are detailed in our various SEC filings.

With that, I would now like to turn the presentation over to Ford's President and CEO, Alan Mulally.

Alan Mulally - President and CEO: Thank you, George, and good morning. We are pleased to review our first quarter performance and the progress we continue to make in delivering of our Win Ford plan.

Let's turn to the first slide. On Slide 1, Our Win Ford plan depicted here remains the foundation for everything we do. Across the Ford enterprise, we continue to aggressively restructure the business to operate profitably at current demand and changing model mix, accelerate development of new products our customers want and value, finance our plans, and improve our balance sheet and work together effectively as one team, leveraging our global assets. A full family of great products small, medium and large, cars, utilities and trucks that our customers want and value is central to our Win Ford plan.

This year more than 85% of our volume will be on nine global core platforms with examples of nameplates for each platform shown on Slide 2. The benefits from this are more products, faster product cadence, and better profitability. Optimizing platform count lets us increase volume per platform, improve our engineering efficiencies and gain economies of scale for us and our suppliers. Our first quarter results demonstrate the progress we are making in executing all elements of our plan.

Now, on Slide 3, we like to share with you a summary of our first quarter results. In the first quarter, the Company earned an operating profit of $2.1 billion, making it the 15th consecutive profitable quarter. Automotive operating related cash flow was positive as well. We ended the quarter with strong liquidity. The topline grew with year-over-year increase of 10% in both wholesale volume and total Company revenue, including market share gains in both North America and Asia Pacific and Africa.

Among our business units, North America achieved record quarterly performance for pre-tax profit since at least 2000 and Ford Credit's results were solid once again. Asia Pacific and Africa earned a small profit, while Europe and South America incurred losses as anticipated. And in Europe, we remain on track to meet the objectives that we established to transform our European business, leading to profitability by mid-decade. Finally, today we are reconfirming our full year guidance.

Before turning to the financial details, let's recap several other significant noteworthy achievements from the first quarter. As shown on slide 4, we have launched a number of products around the globe. At the North American International Auto Show, we revealed the Ford Atlas and the Lincoln MKC concepts, both of which were very well received. Recently the Ford Focus was named the world's best-selling passenger car in 2012, with the Ford F Series pick-up coming in third and the Ford Fiesta ranking as the best-selling subcompact.

In China, our joint venture engine plant in Nanjing produced our one-millionth made-in-China engine. In Asia Pacific and Africa, our record first quarter retail results were 38% higher than the first quarter of 2012, largely driven by stronger industry and higher market share in China, but supported by retail sales growth in nearly all other Asia Pacific and Africa markets. In the U.S., we continue to add jobs announcing an investment of $200 million and the addition of 450 jobs starting in 2014 as part of our plan to move EcoBoost engine production for North America to Cleveland from Valencia, Spain, consistent with our European transformation plan.

On the financial front, we announced in January that we doubled the dividend.

Now, Bob Shanks will take us through the details of our financial performance in the quarter. Bob?

Robert L. Shanks - EVP and CFO: Thanks, Alan, and good morning, everyone. I'll start on Slide 5 with the summary of our business results for the first quarter and a comparison with the year-ago period. First quarter wholesale volume was 1.5 million units, up 139,000 units from a year ago, and revenue at $35.8 billion was up $3.4 billion. As Alan mentioned, both of these top line metrics were up about 10% from the year-ago period.

Pre-tax profit of $2.1 billion, which excludes special items, was $147 million lower than a year ago, while after-tax earnings per share at $0.41 were $0.02 higher. Net income attributable to Ford including unfavorable pre-tax special items of $23 million was $1.6 billion, $215 million better than a year ago. Earnings were $0.40 a share, up $0.05. You can find additional detail on the special items in Appendix 3.

Automotive operating related cash flow was $700 million, marking the 12th consecutive quarter of positive performance, and Automotive gross cash was $24.2 billion, exceeding debt by $8.2 billion.

Our first quarter operating effective tax rate, which isn't shown, was 26%. Consistent with prior guidance, we expect our full year operating effective tax rate to be similar to 2012, which was 32%.

As shown on Slide 6, both of our sectors, Automotive and Financial Services, contributed to total Company first quarter pre-tax profit of $2.1 billion. This was $147 million lower than a year ago as shown in the memo, more than explained by the Automotive sector. Compared with fourth quarter 2012, total Company pre-tax profit improved $465 million, with both sectors contributing to the better results.

The key market factors and financial metrics for our total Automotive business are shown on Slide 7. First quarter wholesale volume and revenue were both approximately 10% higher than a year ago, driven by North America and Asia Pacific Africa. The higher volume reflects the impact of higher industry volumes and improved market share, as well as favorable changes in dealer stocks. The growth in revenue was mainly driven by the higher volume and net pricing gains, offset partially by unfavorable exchange. Automotive pre-tax profit was $1.6 billion and operating margin was 5.2%, both lower than a year ago due to Europe and South America.

The $200 million decrease in total Automotive first quarter pre-tax profit compared with 2012 is explained by causal factor on Slide 8. The decline is more than explained by higher cost and unfavorable exchange. The cost increase reflects mainly investments in higher volume, growth, and new products for this year and the future, as well as restructuring in Europe and higher pension and OPEB expense. The unfavorable exchange is primarily South America, mainly the Venezuelan bolivar. Now partially offsetting these effects are favorable market factors, higher volume, and net pricing, with each region contributing, with the exception of Europe.

As shown in the memo, pre-tax profit was $300 million higher than the fourth quarter 2012, more than explained by lower cost in all regions except Europe. Unfavorable exchange, mainly in South America and Europe, was a partial offset. You can find more details on the quarter-to-quarter change in Appendix 8.

Our first quarter pre-tax results for each of our Automotive operations as well as Other Automotive are shown on Slide 9. North America more than explains the Automotive sector profit of $1.6 billion, while South America and Europe incurred losses. Asia Pacific Africa earned a small profit. Other Automotive reflects net interest expense, offset partially by favorable fair market value adjustment of our investment in Mazda. For the full year, we expect net interest expense to be in line with the first quarter run rate, or $750 million to $800 million.

Now, we'll look at each of the regions within the Automotive sector, starting on Slide 10 with North America. As you can see in the first two graphs on the left, North America experienced very strong growth in the first quarter, with wholesale volume up 17% from a year ago and revenue improving 20%. The volume improvement mainly reflects higher U.S. industry sales, increasing from a SAAR of 14.5 million to 15.6 million units, favorable changes in dealer stocks, and higher U.S. market share. The revenue change primarily reflects the higher volume and net pricing gains.

North America pre-tax profit was $2.4 billion, and as mentioned earlier, was a record for any quarter and higher than a year ago due to the favorable market factors. Operating margin was 11%, the fourth time over the past five quarters that the margin exceeded 10%. This was lower, however, than a year ago due mainly to our investments for new products and growth.

On Slide 11, we show in more detail the causal factors that drove the $300 million improvement in North America's first quarter pre-tax profit. As you can see, the improvement was driven by higher volume and net pricing offset partially by higher cost, mainly for new products and growth as well as higher pension and OPEB expense. As shown in the memo pre-tax profit increased by $0.5 billion compared with fourth quarter 2012 explained primarily by seasonal reduction in costs.

The Company's total U.S. market share and retail share of the retail industry increased in the first quarter compared with the year ago period and the prior quarter as shown on Slide 12. Starting on the left, our total market share was 15.9% up seven-tenths of a percentage point from the same period last year more than explained by strong sales of the all-new Fusion and Escape. The share was up six-tenths of a point from fourth quarter 2012, more than explained by Fusion.

As shown on the right, our retail market share of the retail industry was 14%, an improvement of two-tenths of a percentage point from the same period last year, as our all-new Fusion and Escape did very well in their respective segments. We also benefited from favorable market segmentation of full-size pickups. The retail share was up four-tenths of a percentage point from fourth quarter 2012 more than explained by Fusion.

Now, turning to our full year guidance for North America, it remains unchanged. We expect higher pre-tax profit compared with 2012 and an operating margin of about 10%.

Now, let's turn to Slide 13 and take a look at South America. First quarter wholesale volume and revenue were both down 4% compared with a year ago. Although the SAAR improved from 5.4 million units to 5.6 million units, Ford South America volume declined due to unfavorable changes in dealer stocks and lower market share. The market share decline from 9.4% to 9.1% was more than explained by lower availability of Fiesta. South America's lower revenue reflects unfavorable exchange, net of higher pricing. Pre-tax results were a loss of $218 million and the operating margin was a negative 9.4%. The year-over-year declines in both metrics were more than explained by unfavorable exchange.

On Slide 14, we show more detail behind the $272 million decline in South America's first quarter pre-tax results. As mentioned, unfavorable exchange drove the decline mostly due to Venezuela, including the substantial impact of the recent devaluation of the bolivar. Weakness in the Argentinian peso also had an unfavorable effect. Net pricing was higher and mix was favorable, but these factors were offset by higher costs. As shown in the memo, pre-tax results were $363 million lower than fourth quarter 2012, explained primarily by unfavorable exchange.

Our full year guidance for South America is unchanged. We continue to expect results to be about breakeven. The external environment, however, is uncertain particularly in Venezuela and Argentina. So there is a risk; this could advert adversely affect our ability to deliver full year breakeven results for the region. We will keep you apprised of our status as the year progresses.

Let's turn now to Europe beginning on Slide 15. Starting on the left, first quarter wholesale volume declined 8% and revenue was down 7%. The volume decline reflects lower market share and industry volume as the SAAR declined from 14.2 million units a year ago to 13.3 million units this year. Favorable changes in dealer stocks were a partial offset.

The share declined from 8.5% to 7.7%, reflecting mainly lack of availability of CD vehicles as well as our focus to improve retail market share and reduce daily rental and short-cycle sales. Now to that end, our retail share for the five major Western European markets estimated at 8.4% was 0.2% higher than a year ago, while our shares of daily rental and short-cycle sales were lower as intended.

The decline in Europe's revenue mainly reflects the lower volume. The pre-tax loss for Europe was $462 million and the operating margin was a negative 6.9%. Market factors; cost, including restructuring effects; and exchange, all contributed to the declines from a year ago.

Slide 16 shows more detail by the causal factors that drove the $313 million decline in Europe's first quarter pre-tax results compared with a year ago. Most factors were unfavorable. The largest single impact was higher structural cost. This mainly reflects restructuring related cost, principally accelerated depreciation for the facilities we plan to close, and higher pension expense due to lower discount rates. The memo on the right side of the graph shows the restructuring related cost included in the operating results. A reminder; separation related costs, which were minimal this quarter, will be captured in special items. As shown in the memo below the chart, results were $270 million better than fourth quarter 2012, reflecting primarily favorable market factors, including the higher net pricing and favorable exchange was a partial offset.

Slide 17 shows our progress in delivering our European transformation plan, focused on product, brand and cost and unprecedented product acceleration is well underway. To-date we've introduced five new passenger vehicles, including B-Max, Fiesta, Fiesta ST, Kuga and in an example of expanding our global portfolio to new markets the Explorer in Russia. The rollout of our completely redesigned and expanded commercial vehicle lineup is also underway with the introduction of Transit Custom and Tourneo Custom. These new vehicles are off to a strong sales start and beginning to help improve Ford's brand image.

While we expect overall market share in Europe to remain flat in 2013 compared with last year, we are seeing growth as mentioned earlier, in our retail market share which is critical to margins, residuals and brand health. In addition, we are making good progress on quality and customer satisfaction and we remain on track to achieve our targets for the year.

We're also making progress on costs, including our plan to restructure our manufacturing base. In the regard, discussions are progressing with the unions at our Southampton assembly plant and Dagenham stamping and tooling operations as we move to close those plants by midyear. Discussions are progressing at Genk as well where hourly employees have ratified a package of proposed separation benefits and our salaried employees have just reached an agreement on a tentative benefits proposal subject to ratification. As the Genk information and consultation process moves forward, we have resumed normal vehicle production levels at the plant.

And finally, we did complete the planned reductions to our salaried and agency workforce in Europe that were initiated last year. So, in summary, we are on track in delivering our European transformation plan.

Now, in terms of our full year guidance for Europe, it also remains unchanged. We continue to expect the loss of about $2 billion this year. The outlook for the business environment in Europe, however, continues to be uncertain, while we still believe it's possible that economic and industry conditions will begin to stabilize later this year, recent economic indicators are mixed. Despite this challenging environment, we are progressing towards our goal of a profitable growing Ford Europe by mid-decade.

Let's now review Asia Pacific Africa on Slide 18. As shown on the left, first quarter wholesale volume improved 30% compared with the year ago and net revenue, which excludes our China JVs, grew 13%. Our growth in volume reflects mainly higher market share, as well as stronger industry sales, which increased from a SAAR of 32.5 million to 34.5 million units. First quarter market share in the region was 3%, a 30% improvement from the year ago and a first quarter record. And in China, which isn't shown, our market share improved more than a full percentage point to a first quarter record of 3.6%

Asia Pacific Africa's higher revenue reflects higher component sales to our China joint ventures and favorable mix. Asia Pacific Africa pre-tax profit was $6 million and the operating margin was two-tenths of a percentage point, both improved from the year ago period. This reflects mainly favorable market factors, higher royalties and improved subsidiary profits.

The $101 million improvement from the year ago in Asia Pacific Africa's first quarter pre-tax results is explained by causal factor on Slide 19. As we've seen in past quarters, top line related factors, volume, mix and net pricing, were favorable offset largely by higher costs as we continue to invest for further growth in the future. This quarter we also benefited from higher royalties and subsidiary profits, along with higher sales of parts and services, all included in Other. As shown in the memo, Asia Pacific Africa pre-tax results were $33 million lower than fourth quarter of 2012, more than explained by unfavorable volume, including the impact of the Chinese New Year. Our full year guidance for Asia Pacific Africa remains the same. We continue to expect results to be about breakeven. While we expect to deliver strong growth in volume, share, and revenue for the year, costs will continue to largely offset these positive effects as we invest in an expanded product line, seven new plants in China and India, and people to implement our growth plan.

Turning now to Ford Credit, which earned $507 million in the quarter, Slide 20 shows the $55 million increase in first quarter pre-tax profit compared with the year ago by causal factor. The change is primarily explained by higher receivables and favorable residual performance, offset partially by lower credit loss reserve reductions. And as shown in the memo, Ford Credit's pre-tax profit increased by $93 million compared with fourth quarter 2012. For the full year, Ford Credit continues to expect pre-tax profits to be about equal to 2012, year-end managed receivables of $95 billion to $105 billion, and distribution to its parent of about $200 million.

Next on Slide 21, we'll review our Automotive gross cash and operating related cash flow. Automotive gross cash at the end of the quarter was $24.2 billion; $100 million lower than year-end 2012. Automotive operating related cash flow was $700 million, including favorable working capital changes of $400 million. Our cash flow before financing related changes and dividends was $1.1 billion. Debt proceeds were $1 billion, reflecting our $2 billion Automotive debt issuance where we took advantage of favorable market conditions to issue low cost long-term debt. This issuance was offset partially by the redemption of about $600 million of 7.5% callable debt as well as other debt repayments.

During the quarter, we contributed $1.8 billion to our worldwide funded pension plans, which included $1.2 billion of discretionary payments to our U.S. funded plans in line with our previously disclosed long-term pension derisking strategy. And finally, dividends paid in the quarter totaled about $400 million.

Now, we'll summarize our Automotive sector cash and debt position at the end of the first quarter which is captured on Slide 22. Automotive debt at the end of the quarter was $16 billion, $1.7 billion higher than year-end 2012. This increase is driven primarily by our $2 billion debt issuance and the consolidation of $0.5 billion of debt from our Romania operations, offset partially by the redemption of debt I referenced earlier. Proceeds from the debt issuance that were not used for reduction of higher cost debt are being used for pension contributions which will reduce our pension expense by a greater amount than the interest incurred on the debt.

Net cash at the end of the quarter stood at $8.2 billion, which was $1.8 billion lower than year-end 2012. Finally, Automotive liquidity at the end of the quarter was $34.5 billion which was the same as at year-end.

With that, Alan will now take us through our view of the 2013 global business environment as well as our key planning assumptions and metrics for the year.

Alan Mulally - President and CEO: Very good. Thank you, Bob. Summarized on Slide 23 is our view of the business environment going forward. Overall, our outlook has not changed substantially. We project 2013 global GDP growth to be in the 2% to 3% range. Global industry sales are projected to be in the 80 million to 85 million unit range. U.S. economic growth is expected to be in the 2% to 2.5% range with industry sales supported by continued improvement in the housing sector and replacement demand as a result of the older age of the vehicles on the road.

In Brazil, fiscal and monetary policies support economic recovery. In Argentina and Venezuela, there are escalated risks as both economies are in weak conditions with unclear economic policy direction. In Europe, we expect weak conditions to continue, especially in countries undergoing fiscal austerity programs. As noted earlier, it's possible that economic and industry conditions will begin to stabilize later this year. Recent policy decisions are positive steps, but not yet enough to fully restore our business and consumer confidence.

In Asia Pacific and Africa, economic indicators point towards a modest recovery in China this year. Growth in India is below its full potential, partially due to high inflation and interest rates. Overall, despite challenges, we expect global economic growth to continue in 2013.

Our guidance for 2013 detailed here in Slide 24 is unchanged from January. We expect full year industry volume to range from 15 million to 16 million units in the United States; Europe to be the 13 million to 13.5 million unit range, consistent with guidance we provided verbally at the January earnings call; and China to range from 19.5 million to 21.5 million units. We project full year market share to increase compared with 2012 in the United States and China, and to be about equal to the last year in Europe. We are working to improve quality in all regions.

In terms of our financial performance, we expect total Company pre-tax profit to be about equal to 2012; Automotive operating margin to be about equal to or lower than 2012; and Automotive operating related cash flow to be higher than 2012, including capital spending of about $7 billion to support aggressive product refresh rates, expansion of our portfolio in the absolute sense and across the regions and capacity actions. Overall, we expect 2013 to be another strong year for the Ford Motor Company as we continue to work towards our mid-decade guidance.

In closing, our ONE Ford plan is built on a compelling vision, comprehensive strategy and relentless implementation. It includes serving customers in all markets with a full family of vehicles, small, medium and large cars, utilities and trucks. They will each deliver the highest quality, fuel efficiency, safety, smart design and value, while delivering profitable growth for all.

Our ONE Ford plan continues to deliver and we are absolutely focused on building great products, creating a stronger business and contributing to a better world. We delivered strong results in the first quarter and we continue to work our plan for the full year 2013 with continued strength in North America; delivery of global products into South America for product led growth in the remainder of the year, even as we work to adjust to an uncertain economic environment in the region; continued execution of our transformation plan for Europe, which is perceiving as planned as we work to return to profitability by mid-decade; strong investment for long-term success in Asia Pacific and Africa, which is already being reflected in improved revenue and market share, and consistent results from our valued Ford Credit operations, which deliver world-class customer service and solid bottom line results.

This concludes our report of our first quarter results. Now we'd be delighted to take your questions. George?

George Sharp - Executive Director, IR: Thanks Alan. Now, we'll open the lines for about a 45-minute Q&A session. We'll begin with questions from the investment community then take questions from the media. Now, in order to allow as many questions as possible within the timeframe, please keep your questions brief. Janeta, can we please have the first question?

Transcript Call Date 04/24/2013

Operator: John Murphy, Bank of America Merrill Lynch.

John Murphy - Bank of America Merrill Lynch: First question on the pension contributions. Do you think there is the opportunity to potentially raise more debt and use that capital to contribute to the pension plan, because it seems like you're getting a pretty ARV there? Is that a strategy you could use for the rest of the contributions?

Robert L. Shanks - EVP and CFO: John, thank you for the question. It's a strategy that we've implemented and are executing. I think we're comfortable with the amount that we've taken from the marketplace and don't have any plans to do anything further in that regard.

John Murphy - Bank of America Merrill Lynch: Second question on Ford Motor Credit. Pretty good start to the year in the first quarter. I was just curious if there is anything that you're seeing as far as credit trends or anything else as far as originations that would lead you to believe that should deteriorate through the course of the year, because your guidance seems to indicate that second, third and fourth quarter would be a lot lower than the first quarter. I was just trying to understand what the thinking is there.

Michael Seneski - CFO and Treasurer, Ford Motor Credit Company: John, it's Mike Seneski. No, credit trends are continuing very well. The reason we're guiding more towards equal to last year is the residual performance, favorable residual performance we saw in the first quarter. We don't expect to continue and actually could, in fact, reverse throughout the year. But other than that, we think volume and credit losses should offset each other and a slight increase in operating costs, so that's why we see about equal.

John Murphy - Bank of America Merrill Lynch: Then just lastly on raw materials, seems like it was a headwind in most regions in the first quarter, and given the decline we saw last year and really sort of maybe more aggressive declines in raw mats we've seen as of late, I was just curious when that could possibly turn and become a bit of a tailwind? Because it seems like it's oddly a headwind and at some point should be a tailwind.

Robert L. Shanks - EVP and CFO: Yeah, actually, John, it wasn't much of a factor at all in the quarter. I think we were only very slightly negative maybe around $50 million for the total Company, including hedging effects. I think in terms of business units, the one that was affected the most was in South America, because of the inflation effects and there's a exchange piece that gets in there as well since a lot of the currencies are priced in dollars; but overall, not much of a factor. Spot rates indicate some downward pressure on commodities, but our call for the full year is it's going to be relatively benign at this point.

John Murphy - Bank of America Merrill Lynch: Truly the last question; just on the Fusion and Escape. I mean, the launch last year was a little bit bumpy towards the end of the year. It seems to be on track right now. Did you get the full benefit of those products really turning around and really ramping up very significantly in the first quarter, or is that benefit really going to be more of a second and third quarter benefit in the margins in North America?

Robert L. Shanks - EVP and CFO: Well, we clearly had a lot of benefit, because Fusion was up 26% in the quarter year-over-year and Escape was up 25%, and the other thing that's very exciting about that along with the other products in the super segment is that was one of the bigger parts of our share increase in the quarter and a lot of that took place on the Coast and in the Southeast. So it's just exactly what we wanted those products to deliver. I think as the quarter progressed, we got better availability; still very popular products, but I think that we'll continue to see strength as the year progresses.

Operator: Brian Johnson, Barclays.

Brian Johnson - Barclays Capital: I want to ask a bit more of a strategic question for – it's probably all three, but maybe Alan and then Bob and Mark. As you look at North American margins, a very simplistic analysis which I think some investors often do is, look, your revenues were up; apply, let's call it, 20% incremental margin and your margins should have expanded. They actually contracted a bit. Now, I would point out very good margins overall. Just when you kind of sit down and you look at budgets and you look at the product programs, how do you balance; well, we could maybe get to mid-teen margins with, okay, here's what we ought to be investing in both product content right now as well as future product developments? What is that trade-off and is there an explicit kind of margin constraint or margin ceiling you build into those?

Robert L. Shanks - EVP and CFO: Okay, Brian, I'll take a shot first. Very, very good question. But first let's acknowledge; fabulous result, fabulous margin, great consistency over a number of quarters, so clearly running on all cylinders in North America, which is presently the backbone of the results. I think what you're seeing – first of all, is you're seeing strength of the brand, you're seeing strength of the products, and a great refresh rate that we've got, and I already touched on some of the individual performance by vehicle line just a second ago. The pricing is holding up and the team is doing a very good job in terms of being very disciplined on that, as well as on matching production to demand, and of course, the great cost structure is continuing to bear fruit for us. Now, what we saw in the first quarter, and we have touched on this a bit, I think, in the January earnings call, as we are seeing costs go up at a rate that in the first quarter were holding the margin down from, I'll call it, just a pure leverage effect flowing through, and it's really around the fact that, particularly in the first quarter, remember we added the 400,000 units of annualized capacity last year, most of that happened after the first quarter. Now, we've got all those shifts in place. We also are continuing to invest very heavily in engineering for new products, and I also touched on the non-cash kind of unique items that we are going to see affect the bottom line this year around OPEB and pension and the asset impairment from 2008 as that ran off. The other thing that you're seeing in the results in the quarter is we have about $300 million of bad news on mix in the quarter, which is actually good, because what it says is we are being successful in our strategy to sell more in terms of the smaller vehicles – smaller and medium-sized vehicles, again, touched on the success that we are having there. So that along with the cost that I touched on, which is largely for growth this year and in the future, is what is keeping the margin at sort of that fantastic level of 11% in the quarter.

Brian Johnson - Barclays Capital: Is there any debate about whether you should dial back some of those investments that give more margins to you shorter-term?

Robert L. Shanks - EVP and CFO: Well, we clearly expect to continue to get a great margin going forward. We have guided in our mid-decade outlook of 8% to 10% margin, which I've mentioned a number times in the past is a very, very strong margin in the Automotive business on a consistent basis. That's sort of a cycle average type of number. We're going to continue to invest because we believe we have great growth opportunities not only in places like Asia Pacific and some of the other growing markets of the world here in North America and one I touched on was in the Coast and in the Southeast. We under-indexed on our share in that part of the country; and the type of products that I touched on earlier around the super segment, are starting to bear fruit. A lot of the share growth that we actually saw in the quarter came from those regions as opposed to sort of the Great Lakes central part of the country, which has been our historical core strength. So, that's all good, and we think it's the right call to make to continue to invest in future growth.

Operator: Matt Stover, Guggenheim Partners.

Matthew Stover - Guggenheim Partners: I just wanted to get some color on Europe. It looks like you're down; really that the sales decreased to about negative 3.5% to 7% down, '13 versus '12, which makes a lot of sense, but I'm wondering if you could give us some color on what you would – what signs you're seeing that lead you to the higher end of that range, because it seems like things have sort of accelerated in the worst direction? The second thing on that is there is a stock build of $400 million favorable versus last year. I know it's difficult measuring these on year-on-year basis, but could you give us a sense of where you and your dealer inventory sits in Europe? And then you may have articulated this, but what was the value of the D&A impairment in the quarter?

Robert L. Shanks - EVP and CFO: Let me just give you a couple of responses, then we've got Stephen Odell on line, and he can provide some of the additional color. First of all, the guidance that you see on the slide of 13 million units to 13.5 million units is not a change in guidance. In January at the earnings call, the slide showed 13 million units to 14 million units, but we'd seen some indicators just before the call that caused us to make a verbal adjustment to that that we actually shared with everyone on the call, of lower end of 13 million units to 14 million units and that's what we're simply reflecting here. We had a BofA conference that Joe Hendricks s poke to in New York in March and actually again reconfirmed the 13 million units to 13.5 million units. So, that's not a change in our guidance at all. What was the next point?

Matthew Stover - Guggenheim Partners: In the context of that, you had a stock build of $400 million, Bob. And I know it's tough as you're comparing versus last year, but just what's the sense of your stocks and your dealer stocks right now?

Robert L. Shanks - EVP and CFO: Yeah, well, the dealer stocks – and Stephen can add, I mean the dealer stocks are in great shape. We talked in the fourth quarter about doing a strategic stock reduction and we basically have gotten there with that. We're in the low 40-day supply range in terms of that. What we're actually seeing, we only had 13,000 units of stock change in the quarter. Last year, we had a stock reduction of 20,000 units, so it's the change and the change, if you will, that's generating the $400 million of…

Stephen T. Odell - EVP and President, Europe, Middle East and Africa: Total Company.

Robert L. Shanks - EVP and CFO: Oh, total company, I'm sorry, I thought you were talking about Europe. Yeah, in the case of total Company, if that's what you were talking about…?

Matthew Stover - Guggenheim Partners: No, I was talking about Europe – I was talking Europe.

Robert L. Shanks - EVP and CFO: Okay. Yeah, so that's what happened. It's a non-repeat of the stock reductions that we saw last year which we actually said in January would be one of positive factors that would – that you'd see in our results this year and that's what's coming true.

Alan Mulally - President and CEO: Stephen, do you want to add anything else?

Stephen T. Odell - EVP and President, Europe, Middle East and Africa: Just two quick comments, the industry in the first quarter ran at about 13 to 13.3, so it's right in the middle of our guidance, and April, although not finished yet, is running at the same sort of level. So, we're pretty comfortable with the full year industry guidance. And one important business factor coming out of the reduced dealer inventory, because the dealers are running about 40 days' supply – differs by market, is that now we're actually getting dealers press us the units that we wholesale than was opposed to us pressing them, and that's a significant change in business operation and helpful in regard of also performing better on retail penetration. We've just added 8,000 units of Kuga production because the dealers want to sell more units, up to 100,000 units out of Valencia. So, it was exactly the right thing to do from a business perspective, but also from an ongoing operating perspective.

Matthew Stover - Guggenheim Partners: Then the last thing is on the D&A impairment. What was the value of that in the quarter in Europe?

Robert L. Shanks - EVP and CFO: If you go to the slide on Europe, which is – let me just find. (It's here.) Go to Slide 16, Matt, and what you can see to the far right is we show the restructuring cost that we incurred in the quarter was $110 million, (because) the structural costs were $83 million – majority of that, I think, around $80 million or so was the accelerated depreciation.

Operator: Rod Lache, Deutsche Bank.

Rod Lache - Deutsche Bank: A couple of questions, first of all, on structural costs. They were up $900 million for the Company this quarter. Could you talk a little bit about your expectations for the year and within North America $500 million, yet a very good 17% increase in wholesale volumes to cover that this quarter, but the production comps obviously get a little bit tougher over the next few quarters because you had capacity in the middle of last year. So, maybe just some broad comments on what we should be expecting in terms of structural costs.

Robert L. Shanks - EVP and CFO: Thanks for that, Rod. Yeah, we mentioned in January that we expected the structural costs to be increasing at a rate that exceeded last year. We didn't provide any specific numbers. I'm not going to do that today. But you can already start to see it come through in the first quarter. When you look at the roughly $900 million increase on the Company basis, the way to think about that as we kind of break it down not by sort of area of the business, but sort of causal factor, about 30% of that is related to volume this year to support shifts, overtime, sourcing, work pattern changes and so forth; about 40%, I would call, future growth and a lot of that is around the engineering expenses going up, as well as the investments in the brand through the advertising sales promotion, which a part by the way is volume-related directly. Then you've got about a quarter so that is the European restructuring, and then some of these unique things we talked about in January around in North America in particular OPEB, the asset impairment runoff, and then Europe and North America on the pension side. So, those are the factors, and I think you'll see that pattern continue through the course of the year, and we will see higher levels of cost increases as the business grows, as we respond to the needs of our business to support higher shares and higher industries, and the expanded product line going forward.

Rod Lache - Deutsche Bank: And just to two more things. In Europe, it sounds like you're not assuming any material increase in the sales pace, but could you just comment on whether you have any expectations for improving country mix or Ford share in the guidance you are providing? And then lastly, just a question related to China. Are the royalties that are being received in some of your other regions – I know that the China earnings specifically are not material because of the investment, but are you receiving royalties in your other divisions that would be material to the other regions?

Robert L. Shanks - EVP and CFO: Yeah, in the case of Europe, we came in at a 7.7% share in the quarter. We're guiding to a share that's flat for the full year more or less, which was 7.9% last year. So, we clearly expect to do better as we move forward in the balance of the year. Again, you didn't ask this question, but I just have to underscore the good things that are going on in that number. The team has delivered, as we said in the comments earlier, a retail share increase, which, as you know from following North America, was a critical part of the turnaround of our business here, and to achieve that in the first quarter right out of the gate is just absolutely fantastic and particularly in the environment that we're in. And if you look at the pricing, pricing was basically flat; negative $23 million on the size of the business that is – and by the way, good news compared with the fourth quarter. So, doing very well there, and being very disciplined to take down the share in those other segments. We didn't see a share increase in net fleet which we're targeting, but that was because largely the Genk facility was not producing much during the quarter. So, really, really good results there, and we do expect as more new products roll out and we get more availability of new products, that we'll see better shares as the year progresses; maybe by quarter it will be up and down a bit, I don't know, but we're going to do better as we go forward. On royalties, we are seeing royalties come through from the Chinese joint ventures. It's the major factor, but we also see royalties coming from our joint ventures in AutoZone in particular and smaller levels of royalties elsewhere, but China would be the major one and AutoZone and then a bit and Russia as well.

Operator: Peter Nesvold, Jefferies.

Peter Nesvold - Jefferies: Perhaps a related question to Brian's question on operating leverage, a little bit on what Rod was talking about on China. When I look at APA, the revenues doubled in the last five years or so to $10 billion. The segment income is still roughly breakeven. I know the reinvestment rate is very high in that region right now. Is there any way you can help us think through what that region looks like looking out two years, is it three years? At what point does the reinvestment start to taper off, and how should we think about what kind of earnings contributor that particular region could be looking out a few years from now?

Robert L. Shanks - EVP and CFO: Thanks for the questions, Peter, and the questions on leverage are completely understandable. On the question of APA, we have said previously that by mid-decade it's going to represent a really material portion of the overall Company's profits, because by then we will – we have under construction right now seven plants as I mentioned, five in China and two in India. We've got a lot of engineering underway that we're incurring the cost for today that's going to substantially expand our portfolio and the number of segments that we participate in across the region. So, that's kind of where we find ourselves. We were very delicately balanced between that very strong growth and then the investments which will pay off in the next several years. But I think we'll start to see next year to reach and contribute more meaningfully, but certainly by mid-decade it's going to make a big difference in terms of the bottom line at the Company.

Peter Nesvold - Jefferies: Then as a quick follow-up. Can you just update us on where you are at localizing production in South America? Historically, that was a region that could contribute as much as $1 billion in pre-tax. At what point do you think you've localized enough that you can start to generate growth in that region outside of just this cycle, and is there any way of framing, perhaps what level of production you'll have in that region versus past peak sales volumes? So we could try to think through what kind of profit contributor that could be in a few years.

Robert L. Shanks - EVP and CFO: Most of the volume that's sold there is actually built there because of the very high tariff barriers that they have in place in all the key markets. We are rolling out all new products, global products that will replace our legacy products. We're planning to increase our market coverage from 67% today to about 82% by 2015. So that will contribute not only to absolute growth, but we think a stronger relative position in the marketplace. What you're seeing this year is just extremely challenging conditions in Venezuela, which I think everyone understands, but we've also seen issues in terms of the economy in Argentina. So, I think we're starting to move past. The trade restrictions we have reacted to – putting the Fiesta, the refreshed Fiesta into Brazil, actually we were planning to do that before those changes, but that will clearly help us. But we're – it's in progress of being launched right now. So, I think we feel good about our plan for South America, but we've just got to work through these issues that we're suffering from in terms of exchange rates. You can't price for that much exchange overnight. So we're going to have to continue to work our way through that over the course of the year and beyond.

Operator: Adam Jonas, Morgan Stanley.

Adam Jonas - Morgan Stanley: So Alan, I've got to ask you about the Japanese yen. On January 29th in your 4Q call, I asked you about it when the yen was just over 90 and you mentioned that you felt there were conversations with the U.S. government on how to encourage the free market to set FX rates and you were kind of encouraged by that. I was curious now with pushing 100, how your thoughts have changed, if you've seen any signs of either behavior changing amongst your Japanese competitors or if that the pace of discussion is intensifying?

Alan Mulally - President and CEO: Sure Adam. Really, really important still, and I am still very much encouraged, because since we talked, the U.S. government has also continued that dialogue with Japan. It's also included in the discussion about the free-trade agreement with TPP. And again, I'm very encouraged to see just the conversation about letting the markets – the exchange rates being part of those free-trade agreements also. So, clearly, this affects everybody around the world, and I'm confident that we're going to work this out to get back to rule-based trading. With respect to the near term, we haven't seen the effect of that yet in a big way. But clearly, that would put many people at very much of a disadvantage if that continues. So I'm very encouraged that we're going continue to work this between government to government.

Adam Jonas - Morgan Stanley: Mike, I've got just a one follow-up question for you about the CFPB Consumer Finance Protection Bureau, where these rules I believe went into enforcement on the 21 March and as one of the largest automotive lenders here in the United States, are you seeing any changes in how you are communicating and working with your dealers? Can you comment on the level of surveillance or any changes of the brackets in terms of the dealer markup and just comment broadly on the risks do you think this could add to your business?

Michael Seneski - CFO and Treasurer, Ford Motor Credit Company: Okay, Adam. Well, first, we're not subject to CFPB examination at this time, because there is no larger market participant rule. Now, that said, Ford Credit is absolutely committed to compliance. It's part of our culture. Our goals are all built around long-term relationships with our customers, so that they become repeat Ford customers in the future. All of our contract decisions are based on objective data. As it relates to dealer compensation, the CFPB has stated that auto dealers provide a valuable service in helping customers with financing and they should be compensated for this. We agreed and obviously, we'll follow and watch as this develops in this space.

Adam Jonas - Morgan Stanley: That's fascinating, Mike. So, you're saying you're not subject to surveillance at this time, but you could be, couldn't you?

Michael Seneski - CFO and Treasurer, Ford Motor Credit Company: We could be. (This tender is) no larger market.

Adam Jonas - Morgan Stanley: So, if this were to continue where you're not subject to it but Wells Fargo, JPMorgan and everybody else is, then you're going to gain – potentially you could have a pretty significant market share opportunity as understanding from the conference calls of your third party Financial Services peers this is a major, major issue for them.

Michael Seneski - CFO and Treasurer, Ford Motor Credit Company: We continue to follow the developments and obviously, we will do whatever – we will follow whatever the legal rulings ultimately become because it is our goal to be compliant with all laws.

Adam Jonas - Morgan Stanley: We'd love to follow up with you after the call on this if possible.

Operator: Ryan Brinkman, JPMorgan.

Ryan Brinkman - JPMorgan: Maybe just a little bit more on South America. Obviously, there was a lot of noise there this quarter with regards to currency. You've already given some color on that. But it also looks like something maybe somewhat material running through other, other line. So, perhaps you could just firstly shade some light on that. Then secondly, your volume mix and your net pricing contribution there in 1Q was essentially offset by the higher contribution in other costs and yet your full year breakeven guidance implies a $218 million rest of your profits. So, something should be getting better there in the remaining quarters of the year. What do you think it is that changes? Is it that your volume or your mix gets better or your pricing, which already seems strong or is it more that maybe cost is less of a headwind?

Mark Fields - COO: This is Mark. Great question. As Bob mentioned earlier, we won't see in the rest of the year. Our assumption is the impact of the devaluation of the bolivar, but was driving some better performance in the rest of the year as we're going to be launching our new Fiesta into the marketplace and also a little later this year on new Focus. So that will complement the performance of our new EcoSport and Ranger and that will drive revenue, and we expect some share performance. Secondly, the thing to keep in mind, in the first quarter, volumes are usually the lowest and the reason for that is you have the plant shutdowns for particularly Carnival in Brazil which you don't experience later in the year. So those are the factors.

Ryan Brinkman - JPMorgan: And then maybe just to finish with a more strategic question on Europe. One element of your restructuring plan there that differs from at least one of your rivals is that while you're also taking facility cost out, at the same time you plan to increase investments and structural spending in other areas to aggressively tackle that market, which I think is always typically the right thing to do. But of course, we're all tempted to think that vehicle sales and production in Europe, it's at this very abnormally low level and it's going to inevitably rebound. Registrations there just continue to slip further than expected. I'm curious if you knew that the industry would not improve over the next several years. Would that somehow cause you to want to shift your strategy with regards to structural spending in the region?

Robert L. Shanks - EVP and CFO: Well, it's a good hypothetical question and we've run lots of scenarios internally as you might imagine. But our plan and our 50-50 call is in fact that we'll see very modest growth in the industry and in economic conditions there. And on that basis, as well as just what we know is healthy for the business, which is to invest in product regardless what the external conditions are, that we've got the right plan. Now, as you said, that is a possibility; the scenario that you outlined, and as you've seen from us in many parts of the world and in many parts of our business, we will constantly look at the external environment and we will adapt as appropriate based on what is coming at us. But we think we've got – so far the call we've made for this year appears to be pretty good, and as I've said, some of the indicators as we look further ahead suggest we could be bottoming out and perhaps this very modest improvement in the external environment; we might see evidence of that later this year, early next year.

Operator: (Deanne Durbin, Associated Press.)

Deanne Durbin - Associated Press: I am wondering if you can talk a little bit about Lincoln. You were shipping Lincolns to Flat Rock during this quarter. I am assuming that that is finished, but I am curious if we're going to see anymore expense for that, and also, are we going to see any additional expenses for a new marketing campaign now that the vehicles are actually on the ground?

Alan Mulally - President and CEO: Jim, you want to take that?

James D. Farley, Jr. - EVP, Global Marketing Sales and Service and Lincoln: The stock for Lincoln dealers on MKZ is building really nicely. Second half of April, we started to get very normal levels of stock. The product MKZ especially is turning very well right now. We're really happy with the sales results. Obviously, we have few more – more than a week to close the month, but I think you'll see in our sales results that the product is being extremely well received. The hybrid mix is much stronger than we thought. The sales on the (coasts) are much stronger than we thought, and we should have a really great story to tell at the end of the month.

Operator: Craig Trudell, Bloomberg News.

Craig Trudell - Bloomberg News: I had question for Mr. Fields. I've pulled up the conversation that you have with some of us after showing the Atlas Concept in January. You are talking about the next generation F-Series and you said that you are going to push, I think, the words were appropriate limits in all elements of the vehicle to maintain leadership there. Are we seeing within the engineering expense a push by Ford to spend on this to make sure that this vehicle remains a leader?

Mark Fields - COO: Overall, as you said, we're very proud of the fact that the F-Series remains the leader in the segment and as you heard from Bob's comments earlier, when you look at some of the structural costs, a number of those structural costs were in the engineering area for new products. So, clearly, as we work on our future products including next generation F-Series that's inherent in those numbers, and I think the key is making sure as we manage that businesses, we manage it appropriately. And I think if you look at it this year, our stocks are in good shape. Our transaction prices are up over $1,100, and we're at the top of transaction prices in the segment. So, I think we're managing the business appropriately and we'll do that to keep our leadership position for the current product and any future product going forward.

Craig Trudell - Bloomberg News: If I can have just one follow-up question actually for Mr. Odell. I wonder about the pricing environment in Europe. You guys did pretty well on pricing in the first quarter it appears. I wonder what your outlook is for Ford specifically and for the industry; how the industry is performing from a pricing standpoint and how it might perform going forward?

Stephen T. Odell - EVP and President, Europe, Middle East and Africa: That's pretty tough to predict other than with industry levels running in between the 13 million and 13.5 million and capacity considerably above that in the industry, we should expect and indeed we are, very competitive levels of spend. Just to confirm – although I've seen something to the contrary, just to confirm, we were actually below industry average for volume manufacturers on the spend which is part of why you (saw our) net pricing being basically neutral in the down industry. And one of the ways that we can achieve that is by driving business towards the more profitable segments like retail business. And we intentionally took down rental and demo business in the first quarter, about 20,000 units in total, which we elected not to pursue, partly through margin, but also because not doing so allows us to richen our mix towards retail, and that's obviously helped by the new product deliveries coming through at a much accelerated pace. So, my perspective would be, if the industry remains in that bandwidth, to be as competitive as it currently is, but of course, it's very volatile. So, we'll remain competitive, but we are selective in where we choose to do our business.

Operator: Alisa Priddle, Detroit Free Press.

Alisa Priddle - Detroit Free Press: I just wanted to ask you about – there was talk about negative pricing due to mix in the quarter, and I'm wondering how that might track for the rest of the year, and whether you think that higher incentives are potential on pickups or other vehicles going forward?

Robert L. Shanks - EVP and CFO: Alisa, it's Bob. Let me just clarify one thing. When I was talking about the mix effect being negative; that is not pricing, that's just the fact that we sell more vehicles that have lower margins than, for example, an F Series. So, it gives us an average negative mix effect in that regard. But as I said, that's simply a reflection of the success that we've had in selling those vehicles. So, as we look ahead for the balance of the year, I think we would expect to continue on a year-over-year basis to see that adverse mix in North America, which again, think of it as very positive because it just simply means we're being very successful with these new products in the smaller, medium size segments.

Alisa Priddle - Detroit Free Press: And do you see incentives becoming a factor going forward, especially in pickups?

Robert L. Shanks - EVP and CFO: As you look at our – we've been very, very, very consistent. Our incentives don't kind of – they're not particularly volatile. We might be tactical in any given month on any particular product line, but on average, our incentives month-to-month-to-month have been very, very consistent. One thing that came up in earlier question that we're going to have to watch very closely is what happens competitively as the Japanese competitors were able to benefit from the weak yen. We are starting around the world, not just in North America, very selectively and very early to see some signs. They are taking advantage of that, but it's a little bit too early to make any particular forecast around that. Other than, we need to really focus on cost because we know that that's going to be important regardless of however they choose to handle that.

Operator: Mike Ramsey, Wall Street Journal.

Mike Ramsey - Wall Street Journal: A quick question was on the – as your platforms go down to – Alan, you mentioned that you are down to nine, it's going to produce 85% of your sales volume globally, and your margin continue to tick up. Is it possible to quantify how much that has contributed to your profitability in terms of reducing your platforms? Is there any way to quantify how much – like maybe over the past five years or even two or three years, how much more profitable each vehicle sale is because of your reduced platforms?

Robert L. Shanks - EVP and CFO: So I'll just give you my perspective, and then maybe others can chime in. We have not quantified that externally. I mean, clearly you can understand in the case of something like an engineering expense, it costs so much to engineer a vehicle. If you can do that and you can then provide that vehicle to all four regions of the world and everyone is sharing in that engineering expense, clearly, all parts of the business are benefitting. The other thing that we benefit from this isn't just the cost side. It's what I just mentioned. We actually can more rapidly and more realistically expand our offerings around the world to a degree that we never have been able to in the past, and an example will be Explorer that we're now going to start building – that we started to build in Russia. Focus in China, we actually wholesaled more in Focus in China in the first quarter than we did in Europe or North America. I mean, who would have thought that just several years ago. So we have so much greater ability to grow and expand the business, because we can take this global portfolio and we can just pick and choose and decide where we want to place these products to take advantage of a particular market opportunity. Mark, do you have anything you want to add on that?

Mark Fields - COO: No, I think you covered it.

Mike Ramsey - Wall Street Journal: Just real quick. This may sound a silly question, but Venezuela seems like such a small country, yet it seems to be having such an outsized impact. Is that because of the Valencia plant being located there or – I mean, can you explain why it has had such a significant impact on earnings?

Robert L. Shanks - EVP and CFO: Yeah, it has a significant impact. It is a small, very small part of the business. I think the industry is only about 180,000 units, and I think last year we sold maybe 23,000 units. The issue is that the exchange rate is controlled by the government and it's artificially strong. So what they've had a history of doing in past years is they've kind of periodically will do an official one-time devaluation. Our balance sheet, because we have difficulty in getting cash out, we get exposed, if you will, on the asset side relative to liabilities, and then when they devalue, suddenly we've got to sort of devalue that asset positive balance sheet, and we take a hit when we do that. I hope you're (indiscernible) understood that, but that's what makes it very, very tough in the marketplace and more recently, this past devaluation, there's actually pressure on all the manufacturers to hold back on pricing. So it's a very tough market and we're just going to have to work our way through that.

Operator: Chris Ceraso, Credit Suisse.

Christopher Ceraso - Credit Suisse: I had a couple of questions about seasonality in both North America and Europe and the progression throughout the year, maybe in Europe first. I think typically you would have stronger first half versus the back half because of downtime in Q3 and Q4. Should we expect a similar pattern this year, or does the progression and the momentum that you'll have in new product launches counterbalance that? What should we expect in terms of the cadence throughout the year?

Robert L. Shanks - EVP and CFO: Chris, I understand why you're asking that question. I would too if I were in your shoes. But really, really I'm reluctant to say anything that would be interpreted as a forecast of any particular quarter for any particular region. You're correct in looking at history that in general the first half will be better than the second half, and that has to do with the long vacations and the summer and that type of thing. But we're in kind of a different place in terms of the restructuring. The restructuring, I think, will hopefully continue to build on the fabulous results that Stephen and the team have delivered in the first quarter. They've got a lot of new product that have yet to be fully reflected in the marketplace. It's possible that, as we said earlier, you could see a little bit of tilting upward, if you will, in terms of economic and industry conditions toward the latter part of the year. So, I really would hesitate to make any forecast on a quarterly basis for Europe in particular.

Christopher Ceraso - Credit Suisse: Okay, those are all helpful points. Maybe similar, without giving us the answer, some comments about North America. The different cost items that came in – is that stuff all relatively steady as you go throughout the year? I know pension expense usually is pretty consistent quarter-to-quarter, and I'm guessing the changes in your D&A and so forth are pretty consistent quarter-to-quarter. Are there any expense items that are going to travel up or down relative to what they were in Q1?

Robert L. Shanks - EVP and CFO: Well, I mean, obviously, engineering isn't flat by quarter, and then on a year-over-year basis, as I mentioned earlier, some of the things that are affecting us in the first quarter started to come into play last year as those quarters progressed. Warranty is lumpy, because we do have different periods where we kind of true-up the reserves based on the maturity of the time and service for the vehicle lines. So that can be lumpy. But in general, those are probably the exceptions, I think.

Christopher Ceraso - Credit Suisse: And then just a last item on pricing; maybe at a high level, your expectations for North America and Europe in terms of price, maybe focusing on your view of competition and your view of the current state of supply-demand in the market?

Robert L. Shanks - EVP and CFO: Well, for total Company, we expect the year to offer positive pricing to the bottom line. We do think that North America will be a significant contributor to that; of course, with the caveat that we'll have to continue to watch and monitor what happens here as the competitors that benefit from the weaker currencies do or don't take advantage of that, and it depends on how they do that. I think in the case of Europe, Stephen pointed out just doing a great job of holding the line, and I think as the year progresses, if we can come out the year having done that, I think that will be a great step forward for us and I think we'll see positive pricing in the other parts of Ford.

Operator: Itay Michaeli, Citigroup.

Itay Michaeli - Citigroup: So just wanted to ask the North America cost question a bit differently, Bob. Should the year-over-year comparisons in terms of the cost headwind get a little bit easier for you in the back half of the year once you lap the capacity increases for next year or is this sort of year-over-year headwind indicative of the rest of the year?

Robert L. Shanks - EVP and CFO: Well, again, I don't want to provide a quarterly forecast. I think you'll see increases, Itay, on a year-over-year basis for each quarter and it probably will vary a little bit as we go forward for the total Company. And again, for some of the reasons I just mentioned, the calendarization of engineering as those capacity increases came in, as we continue to make further investments for growth not for this year, but for forward year. So, I think you can expect cost increases, but I think it'll vary by quarter.

Itay Michaeli - Citigroup: Then two quick questions on Europe. The second quarter production schedule was a little bit stronger than what we would have thought. Can you talk a little bit about that? Is that some of the Kuga ramp impacting that number? I think you're calling for actually an increase year-over-year. And then do you have a sense yet of the – or can you provide the date for the Mondeo launch next year in Europe?

Robert L. Shanks - EVP and CFO: Maybe Stephen can handle that.

Stephen T. Odell - EVP and President, Europe, Middle East and Africa: Sure. What you're seeing in the second quarter is in part, as you've reference, incremental Kuga production. Not only we're ramping up, but actually we're looking to ramp up at a faster pace to try and match demand. You're also seeing full production out of Genk since we reached the agreements that Bob alluded to earlier on. The plant has produced actually pretty much on schedule every day and our expectation is that will continue through the second quarter. Mondeo launch, we're looking at probably the fourth quarter of next year. Remember that we're still in the information and consultation period with the Belgium unions and that would allow us to seize production in Belgium subject to agreement in September of next year and obviously we then have to ramp up production in Valencia. So, it would be some while after that period.

Operator: Joseph Spak, RBC Capital Markets.

Joseph Spak - RBC Capital Markets: Just on – maybe yet another way to ask North America. Given the current capacity you added and your current outlook for industry but also potentially some share gains. When do you envision getting or approaching the level of utilization that you had early 2012 when you had to sort of think about adding some more capacity?

Robert L. Shanks - EVP and CFO: We're not fully utilizing our capacity right now. In some plants we are, but we're not overall in the system. So, we still have a little bit of flexibility around that regard. Obviously, if there is a need and we're able to use that capacity, we will do so. But we wouldn't have anything to say about that now. I am sorry, I've just got – someone just reminded me, which I should mention. We have announced specifically the added shifts coming on to Flat Rock for the Fusion. That will be in the second half of the year.

Joseph Spak - RBC Capital Markets: Then just, you touched on this a little bit, but circling back to Europe, you noted that pricing wasn't that much of a headwind, but we have heard some horror stories on pricing out of there. So is that that your pricing isn't necessarily getting worse, are you maintaining some discipline or maybe if you could just provide a little bit of color there? And then also, on the mix factor in Europe, you said retail share gains, which I would think should be a positive mix for you unless it's being captured somewhere else, so is that a factor that can turn positive throughout the year if that trend continues?

Robert L. Shanks - EVP and CFO: Yes, Stephen, do you want to handle that?

Stephen T. Odell - EVP and President, Europe, Middle East and Africa: Yeah, we see the pricing outlook, as I tried to answer early on, as stable. It's obviously very competitive, more competitive than it's been probably ever, but stable at that level unless something significant happens to spook the markets. As Bob said, it could be that we see we reached the trough later in the year and then – or later in this year, early next year, and then we start to see a gradual return and that would obviously help pricing.

Robert L. Shanks - EVP and CFO: And on mix, we have adverse mix in Europe in the quarter, a lot of that around the lack of availability of the CD vehicles to the extent that the market would demand, and as Stephen said, that has now been addressed with the plant backup and producing as sort of the latter part of March. So, for the full year, we would expect the possibility of having positive mix effects in Europe.

Stephen T. Odell - EVP and President, Europe, Middle East and Africa: And Bob, if I can just add to that, not only have we got Genk back up and producing, but we've also effectively relaunched the current Mondeo, with probably a stronger bias towards retail. It now meets certain benchmarks – the low benchmarks on tax incentives with CO2 and more equipment at the same price. So, I completely agree with the comment.

Operator: This is all the time we have for questions. I would now like to turn the call back over to Mr. George Sharp for any closing remarks.

George Sharp - Executive Director, IR: Thank you. Thanks everyone. That concludes today's presentation. We're really glad that you were able to join us this morning.

Operator: Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.