Ford Motor Company Earnings Call Nuggets: Pension Contributions and Margin Constraints
John Murphy – Bank of America Merrill Lynch: First question on the pension contributions. Do you think there is the opportunity to potentially raise more debt and use that capital to contribute to the pension plan, because it seems like you’re getting a pretty ARV there? Is that a strategy you could use for the rest of the contributions?
Robert L. Shanks – EVP and CFO: John, thank you for the question. It’s a strategy that we’ve implemented and are executing. I think we’re comfortable with the amount that we’ve taken from the marketplace and don’t have any plans to do anything further in that regard.
John Murphy – Bank of America Merrill Lynch: Second question on Ford Motor Credit. Pretty good start to the year in the quarter. I was just curious if there is anything that you’re seeing as far as credit trends or anything else as far as originations that would lead you to believe that should deteriorate through the course of the year, because your guidance seems to indicate that second, third and fourth quarter would be a lot lower than the first quarter. I was just trying to understand what the thinking is there?
Michael Seneski – CFO and Treasurer, Ford Motor Credit Company: John, it’s Mike Seneski. No credit trends are continuing very well. The reason we’re guiding more towards equal to last year is the residual performance, favorable residual performance we saw in the first quarter. We don’t expect to continue and actually could in fact reverse throughout the year. But other than that, we think volume and credit losses should offset each other and slight increase in operating costs, so that’s why we see about equal.
John Murphy – Bank of America Merrill Lynch: Then just lastly on raw materials, seems like it was a headwind in most regions in the first quarter, and given the decline we saw last year and really sort of maybe more aggressive declines in raw mats we’ve seen as of late, I was just curious when that could possibly turn and become a bit of a tailwind? Because it seems like it’s albeit a headwind and at some point should be a tailwind…
Robert L. Shanks – EVP and CFO: Yeah, actually, John, it wasn’t much of a factor at all in the quarter. I think we were only very slightly negative maybe around $50 million for the total Company, including hedging effects. I think in terms of business units, the one that was affected the most was in South America because of the inflation effects and there’s a exchange piece that gets in there as well since a lot of the currencies are priced in dollars; but overall, not much of a factor. Spot rates indicate some downward pressure on commodities, but our call for the full year is it’s going to be relatively benign at this point.
John Murphy – Bank of America Merrill Lynch: Truly the last question; just on the Fusion and Escape. I mean the launch last year was a little bit bumpy towards the end of the year. It seems to be on track right now. Did you get the full benefit of those products really turning around and really ramping up very significantly in the first quarter or is that benefit really going to be more of a second and third quarter benefit in the margins in North America?
Robert L. Shanks – EVP and CFO: Well, we clearly had a lot of benefit, because Fusion was up 26% in the quarter year-over-year and Escape was up 25%, and the other thing that’s very exciting about that along with the other products in the super segment is that was one of the bigger parts of our share increase in the quarter and a lot of that took place on the Coast and in the Southeast. So it’s just exactly what we wanted those products to deliver. I think as the quarter progressed we got better availability; still very popular products, but I think that we’ll continue to see strength as the year progresses.
Brian Johnson – Barclays Capital: I want to ask a bit more of a strategic question for – it’s probably all three, but maybe Alan and then Bob and Mark. As you look at North American margins, a very simplistic analysis which I think some investors often do is, look, your revenues were up; apply, let’s call it, 20% incremental margin and your margins should have expanded. They actually contracted a bit. Now, I would point out very good margins overall. Just when you kind of sit down and you look at budgets and you look at the product programs, how do you balance; well, we could maybe get to mid-teen margins with, okay, here’s what we ought to be investing in both product content right now as well as future product developments? What is that trade-off and is there an explicit kind of margin constraint or margin ceiling you build into those?
Robert L. Shanks – EVP and CFO: Okay, Brian, I’ll take a shot first. Very, very good question. But first let’s acknowledge; fabulous result, fabulous margin, great consistency over a number of quarters, so, clearly running on all cylinders in North America, which is presently the backbone of the results. I think what you’re seeing – first of all, is you’re seeing strength of the brand, you’re seeing strength of the products and a great refresh rate that we’ve got and I already touched on some of the individual performance by vehicle line just a second ago. The pricing is holding up and the team is doing a very good job in terms of being very disciplined on that as well as on matching production to demand, and, of course, the great cost structure is continuing to bear fruit for us. Now, what we saw in the first quarter, and we have touched on this a bit, I think in the January earnings call as we are seeing costs go up at a rate that in the first quarter we are holding the margin down from I’ll call it just a pure leverage effect flowing through, and it’s really around the fact that, particularly in the first quarter, remember we added the 400,000 units of annualized capacity last year, most of that happened after the first quarter. Now, we’ve got all those shifts in place. We also are continuing to invest very heavily in engineering for new products, and I also touched on the non-cash kind of unique items that we are going to see affect the bottom line this year around OPEB and pension and the asset impairment from 2008 as that ran off. The other thing that you’re seeing in the results in the quarter is we have about $300 million of bad news on mix in the quarter, which is actually good because what it says is we are being successful in our strategy to sell more in terms of the smaller vehicles – smaller and medium-sized vehicles, again, touched on the success that we are having there. So that along with the cost that I touched on, which is largely for growth, this year and in the future is what is keeping the margin at sort of that fantastic level of 11% in the quarter.
Brian Johnson – Barclays Capital: (Indiscernible) about whether you should dial back some of those investments that give more margins to you shorter-term?
Robert L. Shanks – EVP and CFO: Well, we clearly expect to continue to get a great margin going forward. We have guided in our mid-decade outlook of 8% to 10% margin, which I’ve mentioned a number times in the past is a very, very strong margin in the Automotive business on a consistent basis. That’s sort of a cycle average type of number. We’re going to continue to invest because we believe we have great growth opportunities not only in places like Asia Pacific and some of the other growing markets of the world here in North America and one I touched on was in the Coast and in the Southeast. We under-indexed on our share in that part of the country; and the type of products that I touched on earlier around the super segment, are starting to bear fruit. A lot of the share growth that we actually saw in the quarter came from those regions as opposed to sort of the Great Lakes central part of the country, which has been our historical core strength. So, that’s all good, and we think it’s the right call to make to continue to invest in future growth.
A Closer Look: Ford Motor Company Earnings Cheat Sheet>>