1. Playing a High Margin Game in a Low Price Market Hau Thai-Tang Director of Advanced Product Creation Ford Motor Company

2. Current Headlines “Business as usual is dead in Detroit” Detroit News; 9/16/2006 “Ford to Cut 14 Plants And Up to 30,000 Jobs” Washington Post; 1/24/2006 “Dana follows auto parts peers into bancruptcy” Wall Street Journal; 3/6/2006 “Toyota boosts overseas output to 5M” Associated Press; 9/17/2006 “GM to Close 12 North American Sites, Cut 30,000 Jobs” Bloomberg; 11/21/2005 “Oil prices rise above $60 on OPEC plan” Associated Press; 10/16/2006 “Chinese plan to import cars to US” Associated Press; 9/1/2005

3. Middle Market Squeeze BMW 7 Series BMW 5 Series BMW 3 Series BMW 1 Series Mercedes S-Class Mercedes E-Class Mercedes C-Class Mercedes B-Class Mercedes A-Class Lexus LS Lexus ES Lexus IS Toyota Avalon Toyota Camry Toyota Corolla Hyundai Centenial Hyundai Grandeur Hyundai Sonata Hyundai Elantra Hyundai Accent

4. Market Fragmentation Total Number of Models Offered in US Market 0 50 100 150 200 250 300 350 2000200120022003200420052006 2007E 2008E New Model Existing Model

5. Mass Customization

6. Quality Gap Diminishing Range = 2 x defects per vehicle Range = 0.5 defects per vehicle 0 500 1000 1500 2000 2500 3000 3500 200120022003200420052006 Defects Per 1000 Vehicles Hyundai GM DCX Toyota Honda Ford

7. Implications Consumers & Manufacturers Supply > Demand Horizontal versus Vertical Integration Global versus Local Consumer is King Unprecedented Product Choice More Educated / Informed Consumers Extreme Pricing Pressure

8. Business Challenge How to play a high margin game in a low price market?

9. Strategic Approach Consumer Insight Brand Clarity Design Leadership Improve Business Structure

10. 1908 Touring Car 1912 Roadster 1920 Coupe 1924 Fordor Sedan “If I had asked what my customers wanted, they would have said a faster horse…” –Henry Ford Customer Focus Getting at the “Un-met and Un-articulated Needs”

11. Strategic Approach Brand Value & Design Leadership $30 Seiko $300$30,000 Which one tells time better? Patek PhillipeTimex

12. Strategic Approach Revisit Consumer Mobility Paradigm Utilitarian Transportation Mythical Self-Expression

13. Brand Clarity

14. AN AMERICAN REVOLUTION

15. Brand Clarity

16. LET’S MOTOR. Brand Clarity

17. "The Beach Boys. Apple pie. The '67 Mustang. Three things worth fighting for". US Navy Recruiting Ad Brand Clarity – Mustang Example

19. Evolution of Japanese Automotive Design Japanese “American”

20. Evolution of Japanese Automotive Design Japanese “European”

21. Evolution of Japanese Design Ethos West versus Japan

26. Evolution of Japanese Automotive Design Scion XB and Nissan Cube

27. Evolution of Japanese Automotive Design Scion T2B and Nissan Chappo

28. IMAGE HERE Evolution of American Automotive Design “Can Do Spirit”

29. Evolution of American Automotive Design Super Chief Train

30. Evolution of American Automotive Design Super Chief Truck Concept

31. Bold American Design

38. Competitive Environment Internal Complexity GPDS Principles: Synchronization Compatibility Completeness Key Enablers: Platform Rationalization Commonality & Reuse Leverage Digital Tools Drivers for Change More Products, Faster, and More Efficiently Improving Business Structure

39. Global Product Development System 6 Months Opportunity 1.Common Virtual Process 2.Data/Engineering/Manufacturing Synchronization 3.Reuse/Commonality 1.Faster Prototype Build/Verification 2.Faster Production/Prototype Tooling

40. Platform Rationalization Fewer Architectures with More Models Ford Cabriolet Volvo C70 Convertible Mazda3 Volvo V50 Ford C-Max Wave 1 2003 Wave 3 2005-2006 Wave 2 2004 Wagon 5-Door Mazda5 3-Door 4-Door Ford Focus

41. Commonality and Re-Use

42. Leveraging Digital Tools Supplier Integration Product Engineering Theme Development Package Development Functional Simulation Plant / Assembly Product / Process Simulation Virtual Build Service Digital Product / Process CAD Product Structure Digital BOM / BOP

43. Digital Theme Development

44. Virtual Crash Simulation CAE Prediction Physical Test

45. Assembly Plant Virtual Simulation

46. Virtual Build and Assembly Simulation

47. Summary Develop a Profound Understanding of Customers Create Clear and Distinct Brand Positioning Achieve Design Leadership Fix Structural Business Issues How to play a high margin game in a low price market?