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Hey Rob,

Not too much that was startling in the Q&A. They tried to pin Mulally down on Europe. He didn't divulge too much more than has already been outlined.

A few questions on margins arose. They were phrased a couple of different ways. One analyst pointed out that cost savings from platform consolidations should really only just be beginning. If so, wouldn't you expect that your just at the beginning of your margin improvement? Another analyst just flat out asked if they were giving conservative guidance.

The first one was answered strategically. They pointed out that the savings are being pushed back into product development, highlighting that what's being saved in platform development is being spent further strengthening the brand: faster refresh rates, more tophats, facility improvements/ capex and greater advertising spend.

The second question was answered more from an accounting point of view. Asked if the 8-10% pretax margin was low-ball to manage expectations (my wording, not the analyst's), the response was basically no. He pointed out that: (1) the trend is to smaller vehicles, hurting margins, (2) this guidance is meant to be a cycle average and you'll see variation around that guidance, and (3) that the bahavior of the competition needs to be considered. On this last front, they sound skeptical that the industry will not see product dumping in the NA market for share. Whether or not they can maintain discipline and protect margins is up in the air. Especially, if the SAAR picks up to 16-17 range, you may see return to the bad practices the industry is well known for.

Asked about diesels in NA, they basically said that NA air quality standards make diesels impractical except in certain heavy duty cycle vehicles. They constantly reevaluate and have the vehicles in Europe if they ever want to bring them. (Pointed to weak diesel sales as evidence backing them up.)

They were questioned on their poor showing in Consumer Reports quality scores. Pointed to the SYNC issues, tranny problems primarily. Tranny issues are beign fixed, and the infotainment systems are being reworked with Microsoft. They think Sync is a bigger cause of the problem, since all of their internal quality metrics are up in SA, Asia and Europe where Sync is not a major component of sales. At the same time, they pointed out that customers really like Sync, just also complain about the bugs. At the same time it's raising complaints, it's bringing in customers. On the whole, it's a plus.

The most interesting question was on F series. An analyst pointed out that Ford and GM are on dramatically different paths with their new truck programs. GM's emphasis is on the commercial buyer, concetrated on affordability and reliability. Ford's is on higher end product, with more technology and features. Why such a dramatically different view of the future for the segment?

They did emphasize that the Atlas is a concept vehicle, and that needs to be taken into consideration when using it as a paradigm for their direction. However, they did also admit that their strategy is to the high end and that they're only following what their cutomers are buying. EcoBoost take rate is exceptionally high. Options packages are running toward the high end. The market is telling them that customers want these high end features and are willing to pay for high mileage, high content trucks. To directly quote: "our bet is consistent with where we see our customers."

So, this does seem to be a differentiator between Ford and GM; one that even they acknowledge. It should be interesting to see which strategy wins out.

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