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Management’s Discussion and Analysis of Financial Condition and Results of Operations<br />
Total costs and expenses for our Automotive sector for 2011 and 2010 was $122.4 billion and $113.5 billion,<br />
respectively, a difference of $8.9 billion. An explanation of the change as reconciled to our income statement is shown<br />
below (in billions):<br />
2011<br />
Better/(Worse)<br />
2010<br />
Explanation of change:<br />
Volume and mix, exchange, and other<br />
Contribution costs (a)<br />
Commodity costs (incl. hedging)<br />
Material costs excluding commodity costs<br />
Warranty/Freight<br />
Other costs (a)<br />
Structural costs<br />
Other<br />
Special items (b)<br />
$ (11.4)<br />
(2.3)<br />
(1.2)<br />
(0.7)<br />
(1.4)<br />
0.1<br />
8.0<br />
Total<br />
$ (8.9)<br />
_________<br />
(a) Our key cost change elements are measured primarily at present-year exchange; in addition, costs that vary directly with volume, such as material,<br />
freight and warranty costs, are measured at present-year volume and mix. Excludes special items.<br />
(b) Special items primarily reflect the non-recurrence of Volvo costs and expenses in 2011.<br />
Results by Automotive Segment. Details by segment of Income/(Loss) before income taxes are shown below<br />
for 2011.<br />
Total Automotive pre-tax operating profit of $6.3 billion was led by a $6.2 billion profit from Ford North America. Ford<br />
South America earned a solid profit, while Ford Europe was about breakeven, incurring a small loss driven by the<br />
economic uncertainty in the region. Ford Asia Pacific Africa incurred a loss as well, more than explained by the impact of<br />
the Japan and Thailand natural disasters. The loss in Other Automotive was $601 million, reflecting higher interest<br />
expense net of interest income and unfavorable fair market valuation adjustments, mainly for our investment in Mazda.<br />
For 2012, we expect interest expense net of interest income to be about the same as 2011. While interest expense<br />
will be reduced reflecting our lower debt levels, the effect of lower interest rates will be reduced interest income.<br />
Ford Motor Company | 2011 Annual Report 39