Ford Motor Company (F)

Restricted Stock Equivalents and stock options are an important part of Ford’s long-term incentive program.

In 2005, the Committee generally granted the opportunity to earn performance-based Restricted Stock Equivalents and ten-year stock options to Vice Presidents and above. The maximum value of the Restricted Stock Equivalents that could be earned replaced the value of 50% of the stock option grant (based on the same Black-Scholes valuation methodology used to calculate the option expense for accounting purposes) that these executives otherwise would have received, based on the factors described below for other employees. The introduction of performance-based Restricted Stock Equivalents in 2005 complements the stock option program and rewards important achievements in areas the Committee identified as critical drivers of long-term success. Following the 2005 performance period, the Committee reviewed performance towards the achievement of specific goals relating to the following metrics: Company performance (60% weight), strategic direction and operational effectiveness (20% weight), leadership (10% weight), and people and culture (10% weight). The data showed that Ford partially met Company performance goals, partially met strategic direction and operational effectiveness goals, mostly met leadership goals, and mostly met people and culture goals. Based on its review of performance results, the Committee determined that 66% of the maximum value of the Restricted Stock Equivalents had been earned by the participants, including the Named Executives. The amounts awarded as Restricted Stock Equivalents to the Named Executives for 2005 performance are included in column (f) of the Summary Compensation Table on p. 36. The Restricted Stock Equivalents have a one-year restriction period and pay Dividend Equivalents in cash during the restriction period. No Dividend Equivalents were paid during the 2005 performance period for this award opportunity. Following the restriction period, shares of Ford stock will be issued, less any shares withheld to cover any tax liability. In approving the use of Restricted Stock Equivalents, the Committee considered various alternatives to stock options and a number of related factors, including incentive and retention goals, accounting treatment, option overhang, potential share dilution and competitive practice.

You have approved a limit on the number of options that may be granted to any Named Executive in any year. This limit, which is not a target, is 5,000,000, as adjusted under the 1998 Plan. All 2005 stock option grants to the

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In 2005, employees, other than Vice Presidents and above, received ten-year options in amounts generally similar to 2004. Factors used in deciding the size of individual option grants for 2005 included the person’s job, the person’s expected role in the Company’s long-term performance, the special retention needs of the Company, the number of options granted to the person in prior years, as well as the total number of options awarded to all employees.