1. Antti Zhang Greg Bruno Presented 4-7-2011

2.  Oligopoly  The general economy drives the sales, out of company’s control  High Fixed COGS  Consumer Discretionary: Cyclical Industry  Qualities of a Good Company: ◦ Follow the market shift ◦ Control Fix cost ◦ Steal the market

3.  Market Shift ◦ Shift from Truck to Cars ◦ Shift from Large to Small ◦ Shift from US, Europe to Asia and South America ◦ Gas to Hybrid  Over capacity ◦ Over capacity 21M in 5 years ◦ US: 96%, Europe 37% Source: CSMauto.com

4.  Threat to New Entry (Very Low) ◦ Require large amount of investment ◦ Brand Effect ◦ Economic of scale  Threat of Substitute (Low) ◦ Mass Transit Service ◦ Car Sharing  Competitive Rivalry (High) ◦ Some level of product differential ◦ Relative easy to switch

5.  The Bargaining power of Supplies (Very Low) ◦ Many companies in this industry have their own factory to produce the components for assembling ◦ The raw material is 2 nd tier commoditized (Steel, Tires, Glass, etc)  The Bargaining power of Customers (High) ◦ Lots of similar car to choose (GMC vs F150) ◦ Not a kind of necessarily goods

6.  Ford is struggling to retain dominance ◦ Consumer preferences shifting due to fuel prices ◦ High legacy (employee) costs ◦ Entrenched management  Bonds downgraded to Junk (2005) ◦ Eroding market share ◦ Declining margins ◦ Reliance on financing for profit

7.  Ford announces restructuring plan in 2006 ◦ Titled “The Way Forward”  Main Focus ◦ Reduce fixed capital costs ◦ Special focus on cars & crossover vehicles ◦ Profitability across product lines

8.  Reducing Fixed costs ◦ Multiple Divestitures ◦ Planned closings of 14 plants, 7 which make cars  Reduced Ford’s capacity by 26% by 2008  Eliminates up to 30,000 factory jobs by 2012  Focus on cars & crossover ◦ New Product offering of high mileage cars  B-Class subcompact auto platform  Crossover vehicles built on Fusion platform  Return of the Taurus!  Profitability across product lines ◦ Global Product Development system  Reduces cycle times to compete w/ Japanese  New vehicle R&D costs reduced by 60% (2005-2008) Source: Ford 2005 Annual report

9.  Ford (wholly owned) ◦ Flagship brand  Lincoln (wholly owned) ◦ Luxury Brand; focus of revitalization  Mazda (minority stake) ◦ Current ownership of 3.5% stake in Mazda ◦ Reduction from 33.4% stake as of 2008  Aston Martin (minority stake) ◦ Sold in 2007 at a $925 MM valuation with Ford retaining a $77 MM (8.3%) investment  Jaguar & Land Rover (no stake) ◦ Sold to Indian company Tata motors in 2008 for $2.3 Billion (about half of purchase price)  Volvo (no stake) ◦ Sold to Geely Auto in 2010 for $1.8 Billion  Mercury (no stake) ◦ Discontinued in late 2010

10.  Chairman Bill Ford ◦ Commissioned the writing of a restructuring plan ◦ Steps down as President and CEO  Alan Mulally ◦ Former VP of Boeing and CEO of Boeing Commercial ◦ Engineer credited with BCAs revival in early 2000’s ◦ Mortgaged company in 2006 for $23.6 Billion ◦ Successful negotiations with UAW  Reduced Labor cost per hour by ~ 28%

11. “Alan was the right choice, and it gets more right every day.” -William Clay Ford, Chairman http://cache.gawkerassets.com/assets/images/12/2009/12/alan_mulally_ford.jpg

12. Source: Capital IQ

13. FordToyotaGMHondaNissan Revenue Growth (LTM) 10.9%14.1%29.6%11.4%20.0% EBITDA Margin 11.2%9.0%9.2%10.9%13.5% EBITDA Margin Growth (LTM) 170.0%120.1%N/A118.8%152.3% Total Debt / EBITDA 7.2x6.9x0.9x4.1x3.3x ROA3.1%1.1%2.6%3.4%3.3% First positive value since 2005 Source: Capital IQ

14. FordToyotaGMHondaNissan P/E9.49x20.6911.379.3310.67 TEV / EBITDA 9.57x9.793.447.295.36 Mkt Cap / Revenue 0.46x0.520.380.580.35 P/ETEV/EBITDAP/S Max20.699.790.58 Mean13.016.470.46 Min9.333.440.35 Source: Capital IQ

16.  Total Liabilities / Total Assets = 100.6%  Quick Ratio = 1.5x ◦ (Cash + Receivables + Securities) / Current Liabilities  EBIT / Interest Expense = 4.9x Source: Capital IQ

17. Breakdown of Debt Source: Ford 10k

18. Debt Repayment Schedule Source: Ford 10k

19.  Potential Market Movers ◦ Return to Investment grade debt status ◦ Resumption of dividend  Increasing Nationalism ◦ Ford is linked to national psyche ◦ Highest brand loyalty in the United States  No Bailout ◦ Increases goodwill with investors & consumers ◦ Proven (or lucky) financiers

20.  Short-Term ◦ Supply Chain disrupts production at two plants  Mustang, Super Duty F-Series, Expedition / Navigator  Increased costs due to search for new suppliers  Long-Term ◦ Provides opportunity to gain and hold market share in the small car market ◦ Loss of sales by competitors could force industry capacity shrinkage  Average car price increases, margins improve

21. 20052006200720082009 US 17.517.116.513.510.6 Europe 17.617.818.016.615.8 South America 2.73.24.14.34.2 Asia 17.318.620.420.924.5 Source: Ford’s 10K Industry Sales Volume

22.  US: 15.3%  Europe: 10.4%  South America: Approximately 15%  Asia Pacific: 2% ◦ Emphasis of expansion efforts Source: Ford’s 10K

24. Source: Ford’s 10K, BNP CIB Report

26. 3 Parts 1 Long Term Debt: YTM on current issued note 2 Short Term Debt: Revolving loan rate 3 Cost of Equity: CAPM using both raw beta and industry’s beta

28.  Place order for 300 shares at $14.95 ◦ Limit, good through 5-3-2011