RESULTS OF OPERATIONS

TOTAL COMPANY

Our net income attributable to Ford Motor Company was $1 billion or $0.26 per share of Common and Class B Stock in the second quarter of 2012, a decrease of $1.4 billion from net income attributable to Ford Motor Company of $2.4 billion or $0.59 per share of Common and Class B Stock in the second quarter of 2011. Our net income attributable to Ford Motor Company was $2.4 billion or $0.61 per share of Common and Class B Stock in the first half of 2012, a decrease of $2.5 billion from net income attributable to Ford Motor Company of $4.9 billion or $1.20 per share of Common and Class B Stock in the first half of 2011. The decrease in net income is explained primarily by lower operating results and higher tax expense related to the tax valuation allowance release in the fourth quarter of 2011.

Total Company results are shown below:

                                               Second Quarter                      First Half
                                                       Better/(Worse)                    Better/(Worse)
                                           2012             2011             2012             2011
                                         (Mils.)          (Mils.)          (Mils.)          (Mils.)
Income/(Loss)
Pre-tax results (excl. special items)  $    1,829     $       (1,049 )   $    4,122     $       (1,593 )
Special items                                (234 )               38           (489 )             (156 )
Pre-tax results (incl. special items)       1,595             (1,011 )        3,633             (1,749 )
(Provision for)/Benefit from income
taxes                                        (557 )             (351 )       (1,197 )             (771 )
Net income/(loss)                           1,038             (1,362 )        2,436             (2,520 )
Less: Income/(Loss) attributable to
noncontrolling interests                       (2 )               (4 )            -                 (7 )
Net income/(loss) attributable to Ford $    1,040     $       (1,358 )   $    2,436     $       (2,513 )

Income/(Loss) before income taxes includes certain items ("special items") that we have grouped into "Personnel and Dealer-Related Items" and "Other Items" to provide useful information to investors about the nature of the special items. The first category includes items related to our efforts to match production capacity and cost structure to market demand and changing model mix and therefore helps investors track amounts related to those activities. The second category includes items that we do not generally consider to be indicative of our ongoing operating activities, and therefore allows investors analyzing our pre-tax results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results.

As detailed in Note 18 of the Notes to the Financial Statements, we allocate special items to a separate reconciling item, as opposed to allocating them among the operating segments and Other Automotive, reflecting the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources among the segments.

The following table details Automotive sector special items in each category:

                                                Second Quarter           First Half
                                               2012        2011        2012        2011
                                              (Mils.)     (Mils.)     (Mils.)     (Mils.)
Personnel and Dealer-Related Items
Personnel-reduction actions                  $   (51 )   $  (110 )   $  (290 )   $  (132 )
Mercury discontinuation/Other dealer actions     (13 )       (61 )       (29 )       (62 )
Job Security Benefits/Other                       12           5          18           4
Total Personnel and Dealer-Related Items         (52 )      (166 )      (301 )      (190 )
Other Items
Loss on sale of two component businesses        (173 )         -        (173 )         -
Belgium pension settlement                         -        (104 )         -        (104 )
Trust Preferred redemption                         -           -           -         (60 )
Other                                             (9 )        (2 )       (15 )        21
Total Other Items                               (182 )      (106 )      (188 )      (143 )
Total Special Items                          $  (234 )   $  (272 )   $  (489 )   $  (333 )

Discussion of Automotive sector, Financial Services sector, and total Company results of operations below is on a pre-tax basis and excludes special items unless otherwise specifically noted.

The chart below details second quarter 2012 pre-tax operating results by sector:

AUTOMOTIVE SECTOR

In general, we measure year-over-year change in Automotive pre-tax operating profit for our total Automotive sector and reportable segments using the causal factors listed below, with revenue and cost variances calculated at present-year volume and mix and exchange:

• Market Factors:

? Volume and Mix - Primarily measures profit variance from changes in wholesale volumes (at prior-year average margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the profit variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line.

? Net Pricing - Primarily measures profit variance driven by changes in wholesale prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, and special lease offers.

• Contribution Costs - Primarily measures profit variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty costs.

• Other Costs - Primarily measures profit variance driven by absolute change in cost categories that typically do not have a directly proportionate relationship to production volume. These include mainly structural costs, described below, as well as all other costs, which include items such as litigation costs and costs related to our after-market parts, accessories, and service business. Structural costs include the following cost categories:

? Manufacturing and Engineering - consists primarily of costs for hourly and salaried manufacturing- and engineering-related personnel, plant overhead (such as utilities and taxes), new product launch expense, prototype materials, and outside engineering services.

? Spending-Related - consists primarily of depreciation and amortization of our manufacturing and engineering assets, but also includes asset retirements and operating leases.

? Advertising and Sales Promotions - includes costs for advertising, marketing programs, brand promotions, customer mailings and promotional events, and auto shows.

? Administrative and Selling - includes primarily costs for salaried personnel and purchased services related to our staff activities and selling functions, as well as associated information technology costs.

? Pension and OPEB - consists primarily of past service pension cost and other post-retirement employee benefit costs.

• Exchange - Primarily measures profit variance driven by one or more of the following: (i) impact of gains or losses arising from transactions denominated in currencies other than the functional currency of the locations, (ii) effect of remeasuring income, assets, and liabilities of foreign subsidiaries using U.S. dollars as the functional currency, or (iii) results of our foreign currency hedging activities.

• Net Interest and Other - Primarily measures profit variance driven by changes in our Automotive sector's centrally-managed net interest (primarily interest expense, interest income, and other adjustments) and related fair value market adjustments in our investment portfolio and marketable securities as well as other items not included in the causal factors defined above.

Total Automotive. The charts below detail key metrics and the change in pre-tax operating results for the second quarter of 2012 compared with the second quarter of 2011 by causal factor. Automotive operating margin is defined as Automotive pre-tax operating results, excluding special items and Other Automotive, divided by Automotive revenue.

The decline of about $900 million in total Automotive pre-tax operating profit from a year ago is explained mainly by higher costs, primarily related to product and capacity launches this year, investment for future growth, and higher commodity costs including hedging effects. Market factors, including a reduction in dealer stocks, and exchange were also unfavorable.

The decrease of about $400 million in pre-tax operating profit for the second quarter of 2012 compared with the first quarter of 2012 was more than explained by higher costs.

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

Total costs and expenses for our Automotive sector for second quarter 2012 and
2011 was $30 billion and $31.6 billion, respectively, a difference of $1.6
billion; for first half 2012 and 2011 these were $59 billion and $60.5 billion,
respectively, a difference of $1.5 billion. An explanation of the changes, as
reconciled to our statement of operations, is shown below (in billions):
                                              2012 Better/(Worse) 2011
                                                                  First
                                          Second Quarter          Half
Explanation of change:
Volume and mix, exchange, and other      $        2.0         $       2.9
Contribution costs (a)
Commodity costs (incl. hedging)                  (0.3 )              (0.5 )
Material costs excluding commodity costs         (0.1 )              (0.2 )
Warranty/Freight                                  0.1                 0.1
Other costs (a)
Structural costs                                 (0.3 )              (0.6 )
Other                                               -                (0.2 )
Special items                                     0.2                   -
Total                                    $        1.6         $       1.5


_________

Results by Automotive Segment. Details by segment of Income/(Loss) before income taxes are shown below for the second quarter of 2012.

[[Image Removed]] Second quarter 2012 total Automotive pre-tax operating profit of $1.4 billion is more than explained by Ford North America. The loss in Other Automotive mainly reflects net interest expense and an unfavorable fair market value adjustment, primarily on our investment in Mazda.

We expect full-year 2012 net interest expense to be between $500 million and $550 million.

Ford North America Segment. The charts below detail key metrics and the change in pre-tax operating results for second quarter 2012 compared with second quarter 2011 by causal factor.

Our total U.S. market share in the second quarter, at 15.6%, was down 1.7 percentage points from the same period last year. This is explained by lower share in both retail and fleet segments, with lower total share primarily reflecting the impact of discontinued products such as Ranger and Crown Victoria, new competitive entrants in the small-car segment, and Japanese competitors rebuilding dealer stocks and sales after the impact of the tsunami in second quarter 2011.

Our outlook for Ford North America is unchanged. We expect significantly higher full-year pre-tax profit and operating margin compared with 2011 as consumers continue to respond to our strong product line-up, including the recently launched all-new Escape and the all-new Fusion launching later in the year. We also remain committed to maintaining our competitive cost structure as we grow our business.

Ford South America Segment. The charts below detail key metrics and the change in pre-tax operating results for second quarter 2012 compared with second quarter 2011 by causal factor.

Ford South America had a pre-tax operating profit of $5 million for the second quarter of 2012, compared with a profit of $267 million a year ago. The decrease is explained by lower volume, higher costs, and unfavorable exchange. Although net pricing was higher, it was constrained compared with recent periods by a more intense competitive environment.

The decrease in pre-tax operating profit for the second quarter of 2012 compared with first quarter 2012 was more than explained by higher costs, mainly structural costs related to developing and launching new products in the region.

Although we continue to expect Ford South America to be profitable for the full year, we now expect the level to be substantially lower than 2011. This reflects increased competitive pressures, weakening currencies, and changes in government policies affecting areas such as trade and access to foreign currency. We are continuing to work on actions to strengthen our competitiveness in this changing environment, looking at all areas of the business to improve our results. These actions include fully leveraging our One Ford plan, including the introduction of an all-new lineup of global products over the next two years, starting with the launch of Ranger, EcoSport, and Fusion in the second half of 2012.

Ford Europe Segment. The charts below detail key metrics and the change in pre-tax operating results for second quarter 2012 compared with second quarter 2011 by causal factor.

Ford Europe had a pre-tax operating loss of $404 million for the second quarter, a decline of $580 million from a year ago. The decline in results mostly reflects unfavorable market factors. In particular, volume was unfavorable due to lower industry, share, and associated dealer stock changes. Net pricing was lower as the industry responded to excess capacity with higher incentives.

The decrease of $255 million in pre-tax operating profits for the second quarter of 2012 compared with the first quarter of 2012 reflects unfavorable market factors and higher costs.

Given the deteriorating external environment in Europe, we now expect our full-year loss for the region to exceed $1 billion. The magnitude of the loss will be affected by a variety of factors, including the overall economic environment, competitive actions, and our response to these developments. See "Outlook" below for additional discussion.

Ford Asia Pacific Africa Segment. The charts below detail key metrics and the change in pre-tax operating results for second quarter 2012 compared with second quarter 2011 by causal factor.

Ford Asia Pacific Africa had a pre-tax operating loss of $66 million for the second quarter of 2012, compared with a slight profit a year ago. Market factors were strongly positive, but were more than offset by higher costs associated with new products and investments to support higher volumes and future growth, as well as other factors.

The improvement in pre-tax operating results in the second quarter of 2012 compared with the first quarter of 2012 was more than explained by higher volume.

Although we incurred a first half 2012 pre-tax operating loss for Ford Asia Pacific Africa, we expect results to improve in the second half mainly due to favorable volume and mix as we benefit from added capacity in China and Thailand and the new Focus and all-new Ranger.

FINANCIAL SERVICES SECTOR

As shown in the total Company discussion above, we present our Financial Services sector results in two segments, Ford Credit and Other Financial Services. Ford Credit, in turn, has two segments, North America and International.

Ford Credit. The chart below details the decrease in pre-tax operating profit by causal factor:

The decline of $166 million in pre-tax profits is more than explained by fewer lease terminations, which resulted in fewer vehicles sold at a gain, and lower financing margin; the decline in financing margin is primarily explained by the run-off of higher yielding assets originated in prior years.

We continue to expect full-year 2012 pre-tax profits of about $1.5 billion at Ford Credit, with distributions for full year of between $500 million and $1 billion. Ford Credit will continue to assess future distributions based on available liquidity and managed leverage objectives. Ford Credit anticipates managed receivables to be in the range of $110 billion to $120 billion by mid-decade, and to be in the range of $85 billion to $90 billion at year-end 2012. It also projects managed leverage of 8-9:1 for the foreseeable future, which is a decrease from the prior target of 10-11:1 and is consistent with its goal of achieving and maintaining a strong investment grade balance sheet. Lower leverage has resulted in a change in its mid-decade outlook for return on equity from low double digits to high single digits.

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

Ford Credit's receivables, including finance receivables and operating leases at
June 30, 2012 and December 31, 2011 were as follows (in billions):
                                                              June 30,
                                                                2012         December 31, 2011
Receivables
Finance receivables - North America Segment
Consumer
Retail installment and direct financing leases              $      38.4     $           38.4
Non-Consumer
Wholesale                                                          15.5                 15.5
Dealer loan and other                                               2.3                  2.1
Total North America Segment - finance receivables (a)              56.2                 56.0
Finance receivables - International Segment
Consumer
Retail installment and direct financing leases                      8.8                  9.1
Non-Consumer
Wholesale                                                           7.5                  8.5
Dealer loan and other                                               0.5                  0.4
Total International Segment - finance receivables (a)              16.8                 18.0
Unearned interest supplements                                      (1.6 )               (1.6 )
Allowance for credit losses                                        (0.4 )               (0.5 )
Finance receivables, net                                           71.0                 71.9
Net investment in operating leases (a)                             12.9                 11.1
Total receivables (b)                                       $      83.9     $           83.0
Memo:
Total managed receivables (c)                               $      85.5     $           84.6

(a) At June 30, 2012 and December 31, 2011, includes consumer receivables before allowance for credit losses of $31 billion and $36 billion, respectively, and non-consumer receivables before allowance for credit losses of $19.5 billion and $19.8 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. In addition, at June 30, 2012 and December 31, 2011, includes net investment in operating leases before allowance for credit losses of $4.2 billion and $6.4 billion, respectively, that have been included in securitization transactions but continue to be reported in our financial statements. The receivables are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay Ford Credit's other obligations or the claims of its other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions.

(b) Includes allowance for credit losses of $406 million and $534 million at June 30, 2012 and December 31, 2011, respectively.

(c) Excludes unearned interest supplements related to finance receivables.

Receivables at June 30, 2012 increased from year-end 2011, primarily due to higher leasing in North America.

Credit Losses. The charts below detail quarterly trends of charge-offs (credit losses, net of recoveries), loss-to-receivables ratios (charge-offs on an annualized basis divided by the average amount of receivables outstanding for the period, excluding the reserves and unearned interest supplements related to finance receivables), credit loss reserves, and Ford Credit's credit loss reserves as a percentage of end-of-period ("EOP") receivables:

Ford Credit's second quarter credit losses continued at historically low levels and have improved in all geographic regions from the same period a year ago.

Charge-offs in the second quarter were $17 million, down $32 million from the same period a year ago reflecting lower repossessions in the United States. Charge-offs were down $18 million from the first quarter of 2012, reflecting the same factor.

The credit loss reserves were $406 million, down $267 million from a year ago and down $73 million from the first quarter of 2012, reflecting the decrease in charge-offs.

In purchasing retail finance and lease contracts, Ford Credit uses a proprietary scoring system that classifies contracts using several factors, such as credit bureau information, credit bureau scores (e.g., FICO score), customer characteristics, and contract characteristics. In addition to Ford Credit's proprietary scoring system, it considers other factors, such as employment history, financial stability, and capacity to pay. At June 30, 2012 and December 31, 2011, Ford Credit classified between 5% - 6% of the outstanding U.S. retail finance and lease contracts in its portfolio as high risk at contract inception.

. . .