OVERVIEW - Impact of and Actions in Response to Global Credit Market Crisis.

Automotive Sector. During the third quarter and into the fourth quarter of 2008, a severe deterioration in global credit markets has adversely affected economic conditions and automotive sales around the world. In the United States, industry demand for cars and trucks fell in the third quarter of 2008 to a seasonally-adjusted annual selling rate ("SAAR") of 13.1 million units. In October 2008, U.S. industry sales were at a SAAR of 10.8 million units. These compare with a SAAR of 15.1 million units in the first half of 2008, and 16.5 million units of full-year actual sales in 2007.

Demand for cars and trucks in the 19 European markets in which we participate also deteriorated significantly in the third quarter of 2008 to a SAAR of 16.3 million units, compared with a SAAR of 17.6 million units in the first half of 2008, and 18 million units of full-year actual sales in 2007. In addition, vehicle sales growth rates in South America and the Asia Pacific region are slowing.

The recent declines in industry sales have led us to conclude that the global automotive industry downturn will be deeper, broader, and longer than previously assumed; we expect industry sales in 2009, compared with 2008, to decline, with some recovery beginning in 2010.

Meanwhile, commodity prices continue to be extremely volatile. Crude oil and fuel prices declined significantly in September and October 2008, after having increased substantially during the spring and summer. Steel prices remain high, but scrap steel prices continue to decline. Prices of base metals (copper, aluminum, lead, zinc, nickel) and precious metals (platinum, palladium, rhodium), which we use in our business, also declined significantly in September and October 2008.

Notwithstanding lower-than-expected fuel prices, over the long term we expect that the shift in consumer preferences in the United States away from trucks and traditional SUVs to smaller, more fuel-efficient vehicles will continue.

As discussed in more detail in "Liquidity and Capital Resources" below, we experienced substantial cash outflow during the third quarter of 2008, with our Automotive gross cash declining to $18.9 billion at September 30, 2008 from $26.6 billion at June 30, 2008. In addition, we expect that our $11.5 billion revolving credit facility under our secured Credit Agreement will be reduced to $10.6 billion as a result of Lehman Commercial Paper Inc. ("Lehman CPI"), one the lenders thereunder, having filed for protection under Chapter 11 of the U.S. Bankruptcy Code on October 5, 2008.

We remain committed to the four key priorities of our plan - to aggressively restructure our business to operate profitably, accelerate development of new products our customers want and value, finance our plan and improve our balance sheet, and work together effectively as one team to leverage our global resources. We plan to continue to make investments in products that customers want and value, with planned actions including:

• Delivering best-in-class or among best-in-class fuel economy with every new vehicle introduced globally.

• Introducing industry-leading, fuel-saving EcoBoost engines and doubling the number and volume of hybrid vehicles.

• Leveraging our product strengths to deliver more global vehicles in the B, C, C/D (i.e., sub-compact, compact and medium-sized vehicle) and commercial van segments - by 2010, nearly 40% of our product entries in these segments are expected to be shared between Ford North America and Ford Europe, with 100% alignment expected by 2013.

• Upgrading the Ford, Lincoln, Mercury lineup in North America almost completely by the end of 2010.

• Bringing six European small vehicles to North America from global B-car and C-car platforms.

• Retooling three North American truck plants to produce small, fuel efficient vehicles.

• Supporting our global products with a lean, flexible global manufacturing system.

To support these new product investments and offset continued industry weakness, we are implementing a series of actions through 2010 that are expected to result in improvements to Automotive gross cash totaling a cumulative $14 billion to $17 billion. These actions include:

• Reducing North America salaried personnel-related costs by an additional 10% by the end of January 2009, primarily through personnel reductions or attrition. Additional actions impacting compensation are also being implemented, as described below. These reductions are in addition to global personnel-related cost actions already taken or underway.

• Further reduction of U.S. hourly employees by about 2,600 as a result of the most recent round of targeted buyouts - bringing Ford's total U.S. hourly reductions through buyouts in 2008 to about 7,000.

• Eliminating merit pay raises for North America salaried employees in 2009.

• Eliminating performance bonuses for salaried employees globally under the Annual Incentive Compensation Program for the 2008 performance year.

• Suspending matching funds for U.S. salaried employees participating in Ford's Savings and Stock Investment Plan, effective January 1, 2009.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

• Reducing annual capital spending to a range of $5 billion to $5.5 billion - enabled by efficiencies in our global product development system and reduced spending in declining product segments.

• Reducing engineering, manufacturing, information technology, and advertising costs through greater global efficiencies and alignment with volume assumptions.

• Reducing inventories globally and achieving other working capital improvements.

• Returning about $3 billion in Ford Credit capital consistent with Ford Credit's smaller balance sheet and a focus on core Ford brands.

• Continuing to develop incremental sources of Automotive funding, including divesting of non-core operations and assets, and implementing equity-for-debt swaps.

Because of the uncertainty of timing and eligibility requirements, our revised plan as described above does not include U.S. government assistance under recently enacted programs (e.g., loans under the $25 billion "advanced technology vehicle" loan program of the Energy Independence and Security Act of 2007). We do, however, plan to fully avail ourselves of any such assistance.

Financial Services Sector. Consistent with the overall market, Ford Credit has been impacted by volatility and disruptions in the asset-backed securities markets since August 2007. Ford Credit now faces the increased challenges of the global credit crisis, including reduced access to public and private securitization markets and a significant increase in the credit spreads associated with both asset-backed and unsecured funding. Since September 2008, consistent with the overall market, Ford Credit has experienced further reductions in demand for the asset-backed commercial paper issued under its FCAR Owner Trust retail securitization program ("FCAR"), and a greater percentage of such issuance has been on an overnight basis. In September 2008, Ford Credit decided to reduce the assets of the FCAR program by $2.5 billion which lowered its outstanding FCAR asset-backed commercial paper, and on September 30, 2008 it held $1.1 billion of FCAR asset-backed commercial paper. Ford Credit was able to fund the reduction of the FCAR assets and, in the second half of September 2008, overnight purchases of FCAR commercial paper by utilizing a portion of its other asset-backed liquidity programs. As a result, compared with the second quarter of 2008, Ford Credit's available capacity has become more heavily weighted in FCAR rather than in bank-sponsored asset-backed commercial paper conduits ("conduits"). With respect to its committed capacity renewals in the third quarter of 2008, Ford Credit had a renewal rate of 73%, down from a first half 2008 renewal rate of 90%. The renewals also required significantly higher spreads.

Despite these challenges, as more fully described in "Liquidity and Capital Resources" below, Ford Credit has increased its liquidity available for use from $23 billion at June 30, 2008 to $24.8 billion at September 30, 2008. This increase is primarily the result of a reduction in its managed receivables balance from $140 billion to $130 billion. In addition to the $24.8 billion of liquidity available for use, Ford Credit continues to carry committed capacity in excess of available assets of $5.5 billion that provides it with an alternative to uncommitted sources for funding future purchases or originations. In addition to its traditional liquidity sources, Ford Credit registered to sell up to $16 billion of asset-backed commercial paper under the U.S. Federal Reserve's Commercial Paper Funding Facility ("CPFF"). Each sale under the CPFF is for a term of 90 days and sales can be made up until April 30, 2009. Through October 31, 2008, Ford Credit had sold to the CPFF about 25% of the total amount of asset-backed commercial paper Ford Credit is registered to sell under this program. In addition, FCE Bank plc ("FCE") has accessed short-term European Central Bank ("ECB") funding under its open market operations program, the obligations of which are backed by either notes or receivables.

To further support its liquidity, Ford Credit continues to implement asset-related actions while continuing to provide dealer and consumer financing programs focused on supporting the sale of Ford, Lincoln, Mercury, and Volvo vehicles. These actions include: the transition of Jaguar, Land Rover and Mazda originations to other finance sources; divestitures; and alternative business and funding arrangements.

The recent reduction in auction values for used full-size pick-up trucks and traditional SUVs, together with the present credit market conditions, have made leasing vehicles less economical than in the past. As a result, Ford Credit has reduced its lease originations while still offering leasing to consumers. In the United States and Canada, we continue to focus on retail installment sale financing.

Ford Credit also continues to apply consistent underwriting and originations, and sound servicing practices. However, a continued weakening U.S. economy has contributed to higher charge-offs in Ford Credit's consumer portfolio. This increase primarily reflects both higher severities and repossessions. While Ford Credit's charge-offs are higher, the third quarter 2008 charge-offs are well below our historical peak in 2002.

Ford Credit recognizes that, among other things, lower industry sales could have a significant adverse effect on dealer profitability and creditworthiness. Dealers are required to submit monthly financial statements that Ford Credit monitors for potential credit deterioration, which allows it to quickly take risk mitigation actions as necessary.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

THIRD QUARTER RESULTS OF OPERATIONS

Our worldwide net loss was $129 million or $0.06 per share of Common and Class B
Stock in the third quarter of 2008, improved from a net loss of $380 million or
$0.19 per share in the third quarter of 2007.

Results by business sector for the third quarter of 2008 and 2007 are shown
below (in millions):

                                                                 Third Quarter
                                                                                    2008
                                                                                Over/(Under)
                                                    2008          2007              2007
Income/(Loss) before income taxes
Automotive sector                                 $    (699 )   $    (712 )   $             13
Financial Services sector                               159           556                 (397 )
Total Company                                          (540 )        (156 )               (384 )
Provision for/(Benefit from) income taxes              (462 )         162                 (624 )
Minority interests in net income/(loss) of
subsidiaries *                                           51            62                  (11 )
Income/(Loss) from continuing operations               (129 )        (380 )                251
Income/(Loss) from discontinued operations                -             -                    -
Net income/(loss)                                 $    (129 )   $    (380 )   $            251


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Included in Income/(Loss) before income taxes are items we do not consider indicative of our ongoing operating activities ("special items"). The following table details the third quarter 2008 and 2007 special items by segment or business unit (in millions):

                                                               Third Quarter - Income/(Loss)
Automotive Sector                                                2008                   2007
Ford North America
Personnel-reduction programs                               $           (197 )       $          35
Accelerated depreciation related to AAI's acquisition of
leased facility                                                         (82 )                   -
U.S. dealer reductions                                                  (38 )                   -
Gain/(Loss) on sale of ACH plants/assets                                (19 )                   5
Job Security Benefits (a)                                               320                    75
Retiree health care (primarily curtailment gain) (b)                  2,569                   213
Total Ford North America                                              2,553                   328
Ford Europe
Personnel-reduction programs/Other                                      (40 )                 (39 )
Volvo
Personnel-reduction programs/Other                                      (26 )                  (7 )
Ford Asia Pacific Africa
Personnel-reduction programs                                            (28 )                  (1 )
Impairment of equity interest in Malaysian joint venture                  -                   (10 )
Total Ford Asia Pacific Africa                                          (28 )                 (11 )
Other Automotive
Returns on the assets held in the TAA                                  (250 )                   -
Gain on purchase of debt securities                                      35                     -
Loss on conversion of Trust Preferred Securities                          -                  (632 )
Total Other Automotive                                                 (215 )                (632 )
Jaguar Land Rover and Aston Martin
Loss on sale of Jaguar Land Rover                                       (30 )                   -
Sale of Aston Martin                                                      -                    (1 )
Personnel-reduction programs/Net gains on certain
undesignated hedges/Other                                                (7 )                  12
Total Jaguar Land Rover and Aston Martin                                (37 )                  11
Total Automotive sector                                    $          2,207         $        (350 )


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(b) See Note 12 of the Notes to the Financial Statements for an explanation of the 2008 retiree health care curtailment gain related to the Retiree Health Care Settlement Agreement.

Included in Provision for/(Benefit from) income taxes are tax benefits of $641 million for the third quarter of 2008 that we consider to be special items. This amount primarily consists of a $630 million benefit resulting from the intraperiod tax allocation after taking into consideration both the pre-tax loss from continuing operations and the pre-tax income from other categories of earnings (e.g., other comprehensive income) for the first nine months of 2008. Since this tax benefit is calculated on a year-to-date basis, fourth quarter 2008 pre-tax results from continuing operations and other categories of earnings could result in a partial or full reversal of the tax benefits claimed in the first nine-months of 2008.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The discussion below of Automotive and Financial Services sector results of operations is on a pre-tax basis. Our results for interim periods are not necessarily indicative of results for a full year.

AUTOMOTIVE SECTOR

Details by segment or business unit of Income/(Loss) before income taxes for the
third quarter of 2008 and 2007 are shown below (in millions), with Jaguar Land
Rover and Aston Martin segment separated out from "ongoing" subtotals:

                                                       Third Quarter
                                       2008       2007       2008 Over/ (Under) 2007
Ford North America                    $  (36 )   $ (689 )   $                     653

Ford South America                       480        386                            94

Ford Europe                               29        254                          (225 )

Volvo                                   (484 )     (174 )                        (310 )

Ford Asia Pacific Africa                 (24 )       19                           (43 )

Mazda                                     (1 )       14                           (15 )
Total ongoing Automotive operations      (36 )     (190 )                         154

Other Automotive                        (626 )     (603 )                         (23 )
Total ongoing Automotive                (662 )     (793 )                         131

Jaguar Land Rover and Aston Martin       (37 )       81                          (118 )
Total Automotive sector               $ (699 )   $ (712 )   $                      13

Details by segment of Automotive revenues ("sales") and wholesale unit volumes for the third quarter of 2008 and 2007 are shown below:

                                                                               Third Quarter
                                            Sales (a) (in billions)                                Wholesales (b) (in thousands)
                               2008       2007         2008 Over/(Under) 2007            2008        2007          2008 Over/(Under) 2007
Ford North America (c)        $ 10.8     $ 16.7     $      (5.9 )             (36 )%        462         649            (187 )             (29 )%

Ford South America               2.7        2.1             0.6                31           125         116               9                 8

Ford Europe                      9.7        8.3             1.4                16           410         422             (12 )              (3 )

Volvo                            2.9        3.8            (0.9 )             (24 )          66         102             (36 )             (35 )

Ford Asia Pacific Africa
(d)                              1.7        1.8            (0.1 )              (5 )         111         129             (18 )             (14 )
Total ongoing Automotive
operations                      27.8       32.7            (4.9 )             (15 )       1,174       1,418            (244 )             (17 )

Jaguar Land Rover and Aston
Martin                             -        3.6            (3.6 )            (100 )           -          69             (69 )            (100 )
Total Automotive sector       $ 27.8     $ 36.3     $      (8.5 )             (24 )       1,174       1,487            (313 )             (21 )


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(b) Wholesale unit volumes generally are reported on a where-sold basis, and include all Ford-badged units and units manufactured by Ford that are sold to other manufacturers, as well as units distributed for other manufacturers. Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option, as well as other sales of finished vehicles for which the recognition of revenue is deferred (e.g., consignments), are included in wholesale unit volumes.

(c) Includes sales of Mazda6 by our consolidated subsidiary, AAI.

(d) Included in wholesale unit volumes of Ford Asia Pacific Africa are Ford-badged vehicles sold in China and Malaysia by certain unconsolidated affiliates totaling about 41,000 and 51,000 units in 2008 and 2007, respectively. "Sales" above does not include revenue from these units.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Details of Automotive sector market share for selected markets for the third
quarter of 2008 and 2007, along with the level of dealer stocks as of September
30, 2008 and 2007, are shown below:

                                     Market Share                                Dealer-Owned Stocks (a) (in thousands)
                                                       2008                                                         2008
                                                   Over/(Under)                                                 Over/(Under)
      Market            2008          2007             2007                  2008              2007                 2007
United States (b)          12.4 %        13.4 %             (1.0 ) pts.           478               538                    (60 )
South America (b)
(c)                         9.7          10.3               (0.6 )                 46                30                     16
Europe (b) (d)              8.6           8.6                  -                  342               299                     43
Volvo - United
States/Europe (d)       0.4/1.2       0.6/1.3        (0.2)/(0.1)                16/36             21/44                (5)/(8)
Asia Pacific Africa
(b) (e) (f)                 2.1           2.4               (0.3 )                 56                54                      2


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(b) Market share includes only Ford and, in certain markets (primarily United States), Lincoln and Mercury brands.

(c) South America market share is based, in part, on estimated vehicle registrations for our six major markets (Argentina, Brazil, Chile, Colombia, Ecuador and Venezuela).

(d) Europe 2008 market share is based, in part, on estimated vehicle registrations for the 19 European markets we track (described in "Item 1. Business" of our 2007 Form 10-K Report). Europe 2007 market share is based on actual vehicle registrations for these markets.

(e) Asia Pacific Africa market share is based on estimated vehicle retail sales for our 12 major markets (Australia, China, Japan, India, Indonesia, Malaysia, New Zealand, Philippines, South Africa, Taiwan, Thailand and Vietnam).

(f) Dealer-owned stocks for Asia Pacific Africa include primarily Ford-brand vehicles as well as a small number of units distributed for other manufacturers.

Overall Automotive Sector

The improvement in earnings primarily reflected higher retiree health care curtailment gains ($2.4 billion) and the non-recurrence of a loss on the conversion of 43% of our Trust Preferred Securities (about $600 million). These favorable factors were offset partially by unfavorable volume and mix, mainly in the North American full-size pickup truck segment ($2.1 billion); lower interest income, lower returns on the assets held in the TAA, and unfavorable mark-to-market adjustments for changes in currency exchange rates on intercompany loans, offset partially by lower interest expense (about $700 million); and higher personnel-reduction costs mainly in North America (about $200 million).

The table below details our third quarter 2008 cost changes at constant volume, mix and exchange, excluding special items (in billions):

                                                                     2008 Better/(Worse)
                   Explanation of Cost Changes                            Than 2007
Pension and OPEB  Primarily health care efficiencies                 $               0.4
Spending-related  Primarily the non-recurrence of accelerated
                  depreciation and amortization related to
                  recently-closed facilities                                         0.3
Overhead          Primarily savings related to previous salaried
                  personnel reductions                                               0.3
Manufacturing and More than explained by hourly and salaried
engineering       personnel reductions in North America and
                  efficiencies in our plants and processes                           0.2
Advertising &     Primarily lower costs in North America, offset
sales promotions  by South America and Europe                                          -
Warranty-related  Primarily a slight cost underrun in Europe,
                  offset by overruns in other locations                                -

The decline in revenue primarily reflected lower volumes more than explained by North America, the non-recurrence of 2007 Jaguar Land Rover revenue, unfavorable product mix mainly in North America, and lower net pricing, offset partially by favorable changes in currency exchange rates.

Ford North America Segment. The improvement in earnings primarily reflected higher retiree health care curtailment gains ($2.4 billion), favorable cost changes (primarily reflecting lower pension and OPEB, manufacturing and engineering, spending-related, and overhead costs, offset partially by higher net product costs) (about $500 million), and a reduction in reserves for Job Security Benefits (about $200 million). These factors were offset partially by unfavorable volume and mix ($1.9 billion), lower net pricing (about $400 million), and higher personnel-reduction costs (about $200 million). Unfavorable volume and mix primarily reflected a decline in U.S. industry volumes, unfavorable product mix, very low production of full-size pickup trucks during the third quarter of 2008 as we sold down dealer stocks of 2008 models prior to the launch of 2009 models, and lower market share.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford South America Segment. The increase in earnings primarily reflected higher net pricing, favorable volume and mix, and favorable changes in currency exchange rates, offset partially by unfavorable cost changes. The unfavorable cost changes primarily reflected higher net product costs.

Ford Europe Segment. The decrease in earnings primarily reflected unfavorable . . .