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## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

Details of Automotive sector market share for selected markets for 2004 and 2003 are shown below: 

<img src='content_image/45251.jpg'>

a/ Excludes market share of our PAG brand vehicles (i.e., Volvo, Jaguar, Land Rover and Aston Martin). 

b/ European market share for Ford Europe and PAG are based, in part, on estimated 2004 vehicle registrations for our 19 major markets. 

## Overall Automotive Sector 

The improvement in Income/(loss) before income taxes  primarily reflected the change in charges related to Visteon Corporation (“Visteon”), Ford’s largest supplier (see “Ford North America” discussion below), higher net pricing, favorable cost performance and the favorable effect of tax-related interest on refunds and settlements of prior-year federal and state audits, offset partially by lower vehicle unit sales and unfavorable changes in currency exchange rates. 

The table below details our achievement of our 2004 cost performance milestone (in billions): 

<img src='content_image/45247.jpg'>

* At constant volume, mix and exchange and excluding special items and discontinued operations. 

## The Americas Segment 

- Non-recurrence of 2003 reserve adjustments, offset partially by 2004 improvements. 

- Primarily reductions in hourly and salaried personnel as a result of the Ford Europe Improvement Plan, North American plant closings, and engineering efficiency actions, offset partially by higher costs to launch new vehicles in 2004. 

- Primarily administrative cost savings (largely personnel related), reduced parts distribution costs, and lower litigation expenses, offset partially by higher fixed marketing costs. 

- Primarily the effect of new Medicare drug legislation and higher VEBA contributions, partially offset by the effect of a lower discount rate. 

- New product and commodities-related cost increases, offset by design cost reductions on existing products and pricing efficiencies at our suppliers. 

- Related to investments for new vehicles. 

## Explanation of Cost Performance 

Ford North America. The improvement in earnings primarily reflected the non-recurrence of $1.6 billion of charges in 2003 related to Visteon, offset by a charge of $600 million to establish an allowance against a receivable from Visteon in 2004. The receivable relates to costs for postretirement health care and life insurance benefits provided to Ford hourly employees assigned to Visteon and other select Visteon employees who are former employees of Ford. The charges in 2003 related to agreements with Visteon, which primarily addressed postretirement health care costs for service prior to 2000 for Ford hourly employees assigned to Visteon, as well as pricing, sourcing and other arrangements. 

