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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 2010 and 2009 was $113.5 billion and $107.2 billion,<br />
respectively, a difference of $6.3 billion. An explanation of the change as reconciled to our income statement is shown<br />
below (in billions):<br />
2010<br />
Better/(Worse)<br />
2009<br />
Explanation of change:<br />
Volume and mix, exchange, and other<br />
Material costs excluding commodity costs (a)<br />
Commodity costs (a)<br />
Structural costs (a)<br />
Warranty/Other (a)<br />
Special items (b)<br />
$ (12.1)<br />
1.1<br />
(1.0)<br />
(1.2)<br />
0.1<br />
6.8<br />
Total<br />
$ (6.3)<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 (primarily changes in Volvo costs and expenses<br />
reflecting the sale of these operations).<br />
(b) Primarily reflects changes in Volvo costs and expenses.<br />
Results by Automotive Segment. Details by segment of Income/(Loss) before income taxes are shown below for<br />
2010.<br />
Total Automotive pre-tax operating profit was $5.3 billion, with each Automotive segment profitable. The decline in<br />
Other Automotive primarily reflects higher interest expense net of interest income. This is more than explained by interest<br />
expense associated with the debt owed to the UAW VEBA Trust that was added at the end of 2009 and prepaid in full<br />
during 2010, and the interest expense associated with our convertible debt issued in November 2009, offset partially by<br />
lower interest expense on our revolving debt which was 90% repaid in 2010.<br />
Ford Motor Company | 2011 Annual Report 45