(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Ford Motor Company

Notice of 2007

Annual Meeting of Shareholders

and Proxy Statement

Dear Shareholders:

Our 2007 annual meeting of shareholders will be held at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, on Thursday, May 10, 2007. The annual meeting will begin promptly at 8:30 a.m., Eastern Time. If you plan to attend the meeting, please see the instructions on page 4.

Please read these materials so that you’ll know what we plan to do at the meeting. Also, please either sign and return the accompanying proxy card in the postage-paid envelope or instruct us by telephone or via the Internet as to how you would like your shares voted. This way, your shares will be voted as you direct even if you can’t attend the meeting. Instructions on how to vote your shares by telephone or via the Internet are on the proxy card enclosed with this proxy statement.

Table of Contents

Notice of Annual Meeting of Shareholders

of Ford Motor Company

April 5, 2007

Defined Terms

“Annual Incentive Compensation Plan” means Ford’s Annual Incentive Compensation Plan.

“Class B Stock” means Ford’s Class B Stock.

“Dividend Equivalent” means cash or shares of common stock (or common stock units) equal in value to dividends that would have been paid on shares of common stock.

“Final Award” means shares of common stock and/or cash awarded by the Compensation Committee under a Performance Stock Right.

“Ford” or “we” or “Company” means Ford Motor Company.

“Long-Term Incentive Plan” means Ford’s 1990 or 1998 Long-Term Incentive Plan.

“Named Executives” means the executives named in the Summary Compensation Table on p. 45.

“NYSE” means the New York Stock Exchange, Inc.

“Performance Stock Right” or “Stock Right” means, under the Long-Term Incentive Plan, an award of the right to earn up to a certain number of shares of common stock, or cash, or a combination of cash and shares of common stock, based on performance against specified goals established by the Compensation Committee.

“Restricted Stock Equivalent” or “Restricted Stock Unit” means, under the Long-Term Incentive Plan and/or the Restricted Stock Plan for Non-Employee Directors, the right to receive a share of common stock, or cash equivalent to the value of a share of common stock, when the restriction period ends, as determined by the Compensation Committee.

“SEC” means the United States Securities and Exchange Commission.

“Senior Convertible Notes” means the Ford Motor Company 4.25% Senior Convertible Notes due 2036.

“Trust Preferred Securities” means the Ford Motor Company Capital Trust II 6.50% Cumulative Convertible Trust Preferred Securities.

“1998 Plan” means Ford’s 1998 Long-Term Incentive Plan.

Ford Motor Company

Proxy Statement

The Board of Directors is soliciting proxies to be used at the annual meeting of shareholders to be held on Thursday, May 10, 2007, beginning at 8:30 a.m., Eastern Time, at the Hotel du Pont, 11th and Market Streets, Wilmington, Delaware. This proxy statement and the enclosed form of proxy are being mailed to shareholders beginning April 5, 2007.

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

What is a proxy?

A proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card.

What is a proxy statement?

It is a document that SEC regulations require that we give to you when we ask you to sign a proxy card to vote your stock at the annual meeting.

What is the purpose of the annual meeting?

At our annual meeting, shareholders will act upon the matters outlined in the notice of meeting, including the election of directors, ratification of the selection of the Company’s independent registered public accounting firm, and consideration of eight shareholder proposals, if presented at the meeting. Also, management will report on the state of the Company and respond to questions from shareholders.

What is the record date and what does it mean?

The record date for the annual meeting is March 14, 2007. The record date is established by the Board of Directors as required by Delaware law. Holders of common stock and holders of Class B Stock at the close of business on the record date are entitled to receive notice of the meeting and to vote at the meeting and any adjournments or postponements of the meeting.

Who is entitled to vote at the annual meeting?

Holders of common stock and holders of Class B Stock at the close of business on the record date may vote at the meeting. Holders of Trust Preferred Securities and Senior Convertible Notes cannot vote at this meeting.

On March 14, 2007, 1,824,372,642 shares of common stock and 70,852,076 shares of Class B Stock were outstanding and, thus, are eligible to be voted.

What are the voting rights of the holders of common stock and Class B Stock?

Holders of common stock and holders of Class B Stock will vote together without regard to class on the matters to be voted upon at the meeting. Holders of common stock have 60% of the general voting power. Holders of Class B Stock have the remaining 40% of the general voting power.

Each outstanding share of common stock will be entitled to one vote on each matter to be voted upon.

The number of votes for each share of Class B Stock is calculated each year in accordance with the Company’s Restated Certificate of Incorporation. At this year’s meeting, each outstanding share of Class B Stock will be entitled to 17.166 votes on each matter to be voted upon.

What is the difference between a shareholder of record and a “street name” holder?

If your shares are registered directly in your name with Computershare Trust Company, N.A., the Company’s stock transfer agent, you are considered the shareholder of record with respect to those shares.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of these shares, and your shares are held in “street name.”

How do I vote my shares?

If you are a shareholder of record, you can give a proxy to be voted at the meeting:

The telephone and Internet voting procedures have been set up for your convenience and have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. If you are a shareholder of record and you would like to vote by telephone or by using the Internet, please refer to the specific instructions set forth on the enclosed proxy card. If you wish to vote using a paper format and you return your signed proxy to us before the annual meeting, we will vote your shares as you direct.

If you are a company employee or retiree participating in either of the Company’s Savings and Stock Investment Plan for Salaried Employees or Tax-Efficient Savings Plan for Hourly Employees, then you may be receiving this material because of shares held for you in those plans. In that case, you may use the enclosed proxy card to instruct the plan trustee how to vote those shares. The trustee will vote the shares in accordance with your instructions and the terms of the plan. If you hold shares in any of these plans, the trustee may vote the shares held for you even if you do not direct the trustee how to vote. In these cases, the trustee will vote any shares for which the trustee does not receive instructions in the same proportion as the trustee votes the shares for which the trustee does receive instructions.

If you hold your shares in “street name,” you must vote your shares in the manner prescribed by your broker or nominee. Your broker or nominee has enclosed or provided a voting instruction card for you to use in directing the broker or nominee how to vote your shares.

Are votes confidential? Who counts the votes?

The votes of all shareholders will be held in confidence from directors, officers and employees of the Company except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) in case of a contested proxy solicitation; (c) if a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or (d) to allow the independent inspectors of

election to certify the results of the vote. We will also continue, as we have for many years, to retain an independent tabulator to receive and tabulate the proxies and independent inspectors of election to certify the results.

Can I vote my shares in person at the annual meeting?

Yes. If you are a shareholder of record, you may vote your shares at the meeting by completing a ballot at the meeting.

However, if you are a “street name” holder, you may vote your shares in person only if you obtain a signed proxy from your broker or nominee giving you the right to vote the shares.

Even if you currently plan to attend the meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the meeting.

What are my choices when voting?

In the election of directors, you may vote for all nominees, or you may vote against one or more nominees. The proposal related to the election of directors is described in this proxy statement beginning at p. 5.

For each of the other proposals, you may vote for the proposal, against the proposal, or abstain from voting on the proposal. These proposals are described in this proxy statement beginning at p. 70.

Proposals 1 and 2 will be presented at the meeting by management, and the rest are expected to be presented by shareholders.

What are the Board’s recommendations?

The Board of Directors recommends a vote FOR all of the nominees for director (Proposal 1), FOR ratifying the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2007 (Proposal 2), and AGAINST the shareholder proposals (Proposals 3 through 10).

What if I do not specify how I want my shares voted?

If you do not specify on your proxy card (or when giving your proxy by telephone or over the Internet) how you want to vote your shares, we will vote them FOR all of the nominees for director (Proposal 1), FOR ratifying the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2007 (Proposal 2), and AGAINST the shareholder proposals (Proposals 3 through 10).

Can I change my vote?

Yes. You can revoke your proxy at any time before it is exercised in any of three ways:

What percentage of the vote is required for a proposal to be approved?

A majority of the votes that could be cast by shareholders who are either present in person or represented by proxy at the meeting is required to elect the nominees for director and to approve each proposal. The votes are computed for each share as described on p. 2.

The total number of votes that could be cast at the meeting is the number of votes actually cast plus the number of abstentions. Abstentions are counted as “shares present” at the meeting for purposes of determining whether a quorum exists and have the effect of a vote “against” any matter as to which they are specified.

Proxies submitted by brokers that do not indicate a vote for some or all of the proposals because they don’t have discretionary voting authority and haven’t received instructions as to how to vote on those proposals (so-called “broker non-votes”) are not considered “shares present” and will not affect the outcome of the vote.

How can I attend the annual meeting?

If you are a shareholder of record and you plan to attend the annual meeting, please let us know when you return your proxy. Please tear off the top portion of your proxy card where indicated and bring it with you to the meeting. This portion of the card will serve as your ticket and will admit you and one guest.

If you are a “street name” shareholder, tell your broker or nominee that you’re planning to attend the meeting and would like a “legal proxy.” Then simply bring that form to the meeting and we’ll give you a ticket at the door that will admit you and one guest. If you can’t get a legal proxy in time, we can still give you a ticket at the door if you bring a copy of your brokerage account statement showing that you owned Ford stock as of the record date, March 14, 2007.

Are there any rules regarding admission?

Each shareholder and guest will be asked to present valid government-issued picture identification, such as a driver’s license or passport, before being admitted to the meeting. Cameras, recording devices, and other electronic devices will not be permitted at the meeting and attendees will be subject to security inspections. We encourage you to leave any such items at home. We will not be responsible for any items checked at the door.

Are there any other matters to be acted upon at the annual meeting?

We do not know of any other matters to be presented or acted upon at the meeting. Under our By-Laws, no business besides that stated in the meeting notice may be transacted at any meeting of shareholders. If any other matter is presented at the meeting on which a vote may properly be taken, the shares represented by proxies will be voted in accordance with the judgment of the person or persons voting those shares.

Election of Directors

(Proposal 1 on the Proxy Card)

Twelve directors will be elected at this year’s annual meeting. Each director will serve until the next annual meeting or until he or she is succeeded by another qualified director who has been elected.

William Clay Ford, who had been a member of the Board of Directors since 1948, retired from the Board effective May 12, 2005. As with previous years, the Board of Directors has again requested that Mr. Ford serve as Director Emeritus so that the Board can continue to avail itself of his wisdom, judgment and experience, and Mr. Ford has agreed to so serve. Mr. Ford is entitled to attend Board and committee meetings and participate in discussion of matters that come before the Board or its committees, although he is not entitled to vote upon any such matters and no longer receives compensation as a non-employee Board member.

We will vote your shares as you specify when providing your proxy. If you do not specify how you want your shares voted when you provide your proxy, we will vote them for the election of all of the nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, we will vote your shares for that other person.

Each of the nominees for director is now a member of the Board of Directors, which met thirteen times during 2006. Each of the nominees for director attended at least 75% of the combined Board of Director and committee meetings held during the periods served by such nominee in 2006. The nominees provided the following information about themselves as of February 1, 2007.

Nominees

Committees of the Board of Directors

Audit Committee Report

The Audit Committee is composed of four directors, all of whom meet the independence standards contained in the NYSE Listed Company rules, SEC rules and Ford’s Corporate Governance Principles, and operates under a written charter adopted by the Board of Directors. A copy of the Audit Committee Charter may be found on the Company’s website, www.ford.com. The Audit Committee selects, subject to shareholder ratification, the Company’s independent registered public accounting firm.

Ford management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm, PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”), is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those audited financial statements with United States generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting, and management’s assessment of the internal control over financial reporting. The Audit Committee monitors the Company’s financial reporting process and reports to the Board of Directors on its findings.

Audit Fees

PricewaterhouseCoopers served as the Company’s independent registered public accounting firm in 2006 and 2005. The Company paid PricewaterhouseCoopers $39.7 million and $40.0 million for audit services for the years ended December 31, 2006 and 2005, respectively. Audit services consisted of the audit of the financial statements included in the Company’s Annual Report on Form 10-K, reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, attestation of the effectiveness of the Company’s internal controls over financial reporting, statutory financial statement filings, and providing comfort letters in connection with Ford and Ford Motor Credit Company funding transactions.

Audit-Related Fees

The Company paid PricewaterhouseCoopers $6.1 million and $13.9 million for audit-related services for the years ended December 31, 2006 and 2005, respectively. Audit-related services included due diligence for mergers, acquisitions and divestitures, employee benefit plan audits, attestation services, support for funding transactions, internal control reviews and assistance with interpretation of accounting standards.

Tax Fees

The Company paid PricewaterhouseCoopers $6.6 million and $16.8 million for tax services for the years ended December 31, 2006 and 2005, respectively. The types of tax services provided included assistance with tax compliance and the preparation of tax returns, tax consultation, planning and implementation services, assistance in connection with tax audits, tax advice related to mergers, acquisitions and divestitures, and tax return preparation services provided to international service employees (“ISEs”) to minimize the cost to the Company of these assignments. In 2005, the Company began the transition to a new service provider for tax return preparation services to ISEs. Of the fees paid for tax services, the Company paid 63.6% and 38.1% for tax compliance and the preparation of Company tax returns in 2006 and 2005, respectively.

All Other Fees

The Company did not engage PricewaterhouseCoopers for any other services for the years ended December 31, 2006 and 2005.

Total Fees

For the year ended December 31, 2006, the Company paid PricewaterhouseCoopers a total of $52.4 million in fees, down $18.3 million from the total paid for 2005.

Auditor Independence

During the last year, the Audit Committee met and held discussions with management and PricewaterhouseCoopers. The Audit Committee reviewed and discussed with Ford management and PricewaterhouseCoopers the audited financial statements, and the assessment of the adequacy and effectiveness of internal controls over financial reporting, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The Audit Committee also discussed with PricewaterhouseCoopers the matters required to be discussed by Statement on Auditing Standards Nos. 61 and 90 (Communications with Audit Committees) as well as by SEC regulations.

PricewaterhouseCoopers submitted to the Audit Committee the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee discussed with PricewaterhouseCoopers such firm’s independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the SEC.

The Audit Committee also considered whether the provision of other non-audit services by PricewaterhouseCoopers to the Company is compatible with maintaining the independence of PricewaterhouseCoopers and concluded that the independence of PricewaterhouseCoopers is not compromised by the provision of such services.

In addition, the Audit Committee has adopted strict guidelines and procedures on the use of PricewaterhouseCoopers to provide any services, including advance Audit Committee approval of any services. All non-audit work will not be contracted with PricewaterhouseCoopers other than specific audit-related, tax, and due diligence services that have been approved in advance by the Audit Committee. All engagements with PricewaterhouseCoopers are approved at regularly scheduled meetings of the Committee. The Chair of the Committee may approve any engagement request outside of the regular approval process, with confirmation by the full Committee at its next scheduled meeting.

Nominating and Governance Committee Report

The Nominating and Governance Committee is composed of eight directors, all of whom are considered independent under the NYSE Listed Company rules and Ford’s Corporate Governance Principles. The Committee operates under a written charter adopted by the Board of Directors. A copy of the charter may be found on Ford’s website at www.ford.com.

Composition of Board of Directors/Nominees

The Committee recommends to the Board the nominees for all directorships to be filled by the Board or by you. The Committee also reviews and makes recommendations to the Board on matters such as the size and composition of the Board in order to ensure the Board has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds. Between annual shareholder meetings, the Board may elect directors to vacant Board positions to serve until the next annual meeting.

The Board proposes to you a slate of nominees for election to the Board at the annual meeting. You may propose nominees (other than self-nominations) for consideration by the Committee by submitting the names, qualifications and other supporting information to: Secretary, Ford Motor Company, One American Road, Dearborn, MI 48126. Properly submitted recommendations must be received no later than December 7, 2007 to be considered by the Committee for inclusion in the following year’s nominations for election to the Board. Your properly submitted candidates are evaluated in the same manner as those candidates recommended by other sources. All candidates are considered in light of the needs of the Board with due consideration given to the qualifications described below.

Qualifications

Because Ford is a large and complex company, the Committee considers several qualifications when considering candidates for the Board. Among the most important qualities directors should possess are the highest personal and professional ethical standards, integrity and values. They should be committed to representing the long-term interests of all of the shareholders. Directors must also have practical wisdom and mature judgment. Directors must be objective and inquisitive. Ford recognizes the value of diversity and we endeavor to have a diverse Board, with experience in business, government, education and technology, and in areas that are relevant to the Company’s global activities. Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of time. Directors should also be prepared to offer their resignation in the event of any significant change in their personal circumstances that could affect the discharge of their responsibilities as directors of the Company, including a change in their principal job responsibilities.

Identification of Directors

The Charter of the Committee provides that the Committee conducts all necessary and appropriate inquiries into the backgrounds and qualifications of possible candidates as directors. It has the sole authority to retain and terminate any search firm to be used to assist it in identifying and evaluating candidates to serve as directors of the Company.

The Committee identifies candidates through a variety of means, including search firms, recommendations from members of the Committee and the Board, including the Executive Chairman and the President and CEO, and suggestions from Company management. The Company, on behalf of the Committee, has in the past paid fees to third-party firms to assist the Committee in the identification and evaluation of potential Board members.

Corporate Governance

The Committee developed and recommended to the Board a set of corporate governance principles, which the Board adopted. Ford’s Corporate Governance Principles may be found on its website at www.ford.com. The Committee also reviews management’s monitoring of compliance with the Company’s Standards of Corporate Conduct. See the Corporate Governance section below for more information on our corporate governance practices.

Corporate Governance

Ford has operated under sound corporate governance practices for many years. We believe it is important to disclose to you a summary of our major corporate governance practices. Some of these practices have been in place for many years. Others have been adopted in response to regulatory and legislative changes. We will continue to assess and refine our corporate governance practices and share them with you.

Director Independence

A majority of the directors must be independent directors under the NYSE Listed Company rules. The NYSE rules provide that no director can qualify as independent unless the Board affirmatively determines that the director has no material relationship with the listed company. The Board has adopted the following standards in determining whether or not a director has a material relationship with the Company and these standards are contained in Ford’s Corporate Governance Principles and may be found at the Company’s website www.ford.com.

Based on these independence standards and all of the relevant facts and circumstances, the Board determined that none of the following directors had any material relationship with the Company and, thus, are independent: Stephen G. Butler, Kimberly A. Casiano, Irvine O. Hockaday, Jr., Richard A. Manoogian, Ellen R. Marram, Homer A. Neal, Jorma Ollila, and John L. Thornton. Additionally, Marie-Josée Kravis and Robert E. Rubin, both of whom left the Board during 2006, were determined by the Board to have no material relationship with the Company during the time of their service and, thus, were independent.

Disclosure of Relevant Facts and Circumstances

With respect to the independent directors listed above, the Board considered the following relevant facts and circumstances in making the independence determinations:

Richard A. Manoogian is a member of the Board of Trustees of The Henry Ford and a member of the Board of Directors of Detroit Renaissance. The Company and its affiliates contributed to The Henry Ford amounts more than the greater of $1 million or two percent of The Henry Ford’s total annual discretionary receipts during its three most recently completed fiscal years. Likewise, the Company and its affiliates contributed to Detroit Renaissance more than the greater of $1 million or two percent of Detroit Renaissance’s total discretionary receipts during its three most recently completed fiscal years. Pursuant to the Company’s Corporate Governance Principles, the independent directors listed above (excluding Mr. Manoogian), considering all of the relevant facts and circumstances, determined that the Company’s contributions to The Henry Ford and Detroit Renaissance and Mr. Manoogian’s presence on those Boards did not constitute a material relationship between Ford and Mr. Manoogian. Consequently, these independent directors determined Mr. Manoogian to be independent. With respect to The Henry Ford, the directors gave due consideration to the composition of the Board of Trustees of The Henry Ford, which includes Edsel B. Ford II, William Clay Ford and William Clay Ford, Jr., and the Company’s history of support for The Henry Ford, which predated Mr. Manoogian’s service. Likewise, with respect to Detroit Renaissance, the directors gave due consideration to the composition of the Board of Directors of Detroit Renaissance, which includes William Clay Ford, Jr., as well as Detroit Renaissance’s mission to promote the economic development of Southeastern Michigan, and the Company’s history of contributions to Detroit Renaissance and to the development of Southeastern Michigan. In both cases, the directors determined that the Company was not unduly influenced to make contributions to The Henry Ford or Detroit Renaissance because of Mr. Manoogian’s presence on those boards, nor was Mr. Manoogian unduly influenced by the contributions made by the Company to The Henry Ford and Detroit Renaissance.

Corporate Governance Principles

The Company has adopted Corporate Governance Principles, which are published on the Company’s website (www.ford.com). These principles include: a limitation on the number of boards on which a director may serve, qualifications for directors (including a director retirement age and a requirement that directors be prepared to resign from the Board in the event of any significant change in their personal circumstances that could affect the discharge of their responsibilities), director orientation, continuing education and a requirement that the Board and each of its Committees perform an annual self-evaluation. Shareholders may obtain a printed copy of the Company’s Corporate Governance Principles by writing to our Shareholder Relations Department, Ford Motor Company, One American Road, P.O. Box 1899, Dearborn, Michigan 48126-1899.

Policy and Procedure for Review and Approval of Related Party Transactions

Business transactions between Ford and its officers or directors, including companies in which a director or officer (or an immediate family member) has a substantial ownership interest or a company where such director or officer (or an immediate family member) serves as an executive officer (“related party transactions”), are not prohibited. In fact, certain related party transactions can be beneficial to the Company and its shareholders.

It is important, however, to ensure that any related party transactions are beneficial to the Company. Accordingly, any related party transaction, regardless of amount, is submitted to the Nominating and Governance Committee in advance for review and approval. All existing related party transactions are reviewed at least annually by the Nominating and Governance Committee. The Office of the General Counsel reviews all such related party transactions, existing or proposed, prior to submission to the Nominating and Governance Committee, and our General Counsel opines on the appropriateness of each related party transaction. The Nominating and Governance Committee may, at its discretion, consult with outside legal counsel.

Any director or officer with an interest in a related party transaction is expected to recuse himself or herself from any consideration of the matter.

The Nominating and Governance Committee’s approval of a related party transaction may encompass a series of subsequent transactions contemplated by the original approval, i.e., transactions contemplated by an ongoing business relationship occurring over a period of time. Examples include transactions in the normal course between the Company and a dealership owned by a director or an executive officer (or an immediate family member thereof), transactions in the normal course between the Company and financial institutions with which a director or officer may be associated, and the ongoing issuances of purchase orders or releases against a blanket purchase order made in the normal course by the Company to a business with which a director or officer may be associated. In such instances, any such approval shall require that the Company make all decisions with respect to such ongoing business relationship in accordance with existing policies and procedures applicable to non-related party transactions (e.g., Company purchasing policies governing awards of business to suppliers, etc.).

In all cases, a director or officer with an interest in a related party transaction may not attempt to influence Company personnel in making any decision with respect to the transaction.

Committee Charters/ Codes of Ethics

The Company has published on its website (www.ford.com) the charter of each of the Audit, Compensation, Environmental and Public Policy, Finance, and Nominating and Governance Committees of the Board, as well as its Standards of Corporate Conduct, which apply to all officers and employees, a code of ethics for directors and a code of ethics for the Company’s chief executive officer as well as senior financial and accounting personnel. Any waiver of, or amendments to, the codes of ethics for directors or executive officers, including the chief executive officer, the chief financial officer and the principal accounting officer, may be approved only by the Nominating and Governance Committee and any such waivers or amendments will be disclosed promptly by the Company by posting such waivers or amendments to its website. Printed copies of each of the committee charters and the codes of ethics referred to above are also available by writing to our Shareholder Relations Department, Ford Motor Company, One American Road, P.O. Box 1899, Dearborn, Michigan 48126-1899.

Executive Sessions of Non-Employee Directors

Non-employee directors ordinarily meet in executive session without management present at regularly scheduled Board meetings and may meet at other times at the discretion of the presiding independent director or at the request of any non-employee director. Currently, Irvine O. Hockaday, Jr., is the presiding independent director for the executive sessions of non-management directors. Additionally, all of the independent directors meet at least once annually without management or non-independent directors present.

Audit Committee

The Charter of the Audit Committee provides that a member of the Audit Committee generally may not serve on the audit committee of more than two other public companies. The Board has designated Stephen G. Butler as an Audit Committee financial expert. Mr. Butler meets the independence standards for audit committee members under the NYSE Listed Company and SEC rules. The lead partner of the Company’s independent registered public accounting firm is rotated at least every five years.

Compensation Committee Operations

The Compensation Committee establishes and reviews our overall executive compensation philosophy and strategy and oversees our various executive compensation programs. The Committee is responsible for evaluating the performance of and determining the compensation for our Executive Chairman, the President and CEO and other executive officers, and approving the compensation structure for senior management, including officers. The Committee is comprised of three directors who are considered independent under the NYSE Listed Company rules and our Corporate Governance Principles. The Committee’s membership is determined by our Board of Directors. The Committee’s composition changed in 2006 due to the departure of two former Committee members and the reassignment of other committee members. The Committee operates under a written charter adopted by our Board of Directors. The Committee annually reviews the charter. Recently, the Board updated the Committee’s charter to make clear the Committee’s new responsibilities resulting from the SEC’s recently-adopted compensation disclosure requirements. A copy of the charter may be found on our website at www.ford.com.

The Committee makes decisions regarding the compensation of our officers that are Vice Presidents and above, including the Named Executives. The Committee has delegated authority, within prescribed share limits, to the Long-Term Incentive Compensation Award Committee (comprised of William Clay Ford, Jr., Alan Mulally, and Donat R. Leclair) to approve grants of options, Performance Stock Rights, Restricted Stock Equivalents and other stock-based awards and to the Annual Incentive Compensation Award Committee to determine bonuses, for other employees.

The Board of Directors makes decisions relating to non-employee director compensation. Any proposed changes are reviewed in advance and recommended to the Board by the Nominating and Governance Committee.

The Committee also considers recommendations from Mr. Ford, Mr. Mulally, and the Group Vice President-Corporate Human Resources and Labor Affairs regarding decisions on any major elements of compensation, as well as total compensation, for our other officers. In addition, any major changes in the form or elements of compensation are reviewed in advance by the Office of the Chairman and Chief Executive.

In 2006, the Committee engaged Semler Brossy Consulting Group, LLC, an independent compensation consulting firm, to advise the Committee on executive compensation and benefits matters. Semler Brossy does not advise our management and receives no other compensation from us. The same Semler Brossy principal attended all ten of the Committee meetings in 2006. In addition, the Committee relied on survey data provided by Towers Perrin, an outside consultant. See “How We Determine Compensation” in the “Compensation Discussion and Analysis” on p. 29.

The Committee met ten times during 2006. Committee meetings typically occur prior to the meetings of the full Board of Directors. Bonus target grants, bonus awards, stock option grants, Performance Stock Right grants, final stock awards, grants to earn performance-based Restricted Stock Equivalents, and final awards of Restricted Stock Equivalents typically are decided at the February or March Committee meeting. Officer salaries are reviewed in December each year.

See the “Compensation Discussion and Analysis” on pp. 29-44 for more detail on the factors considered by the Committee in making decisions, including information input processes.

The Committee reviews our talent and executive development program with senior management. These reviews are conducted periodically and focus on executive development and succession planning throughout the organization, at the Vice President level and above.

Our policy, approved by the Compensation Committee, to limit outside board participation by our officers, is shown below:

Board Committees

Only independent directors serve on the Audit, Compensation and Nominating and Governance Committees, in accordance with the independence standards of the NYSE Listed Company rules and the Company’s Corporate Governance Principles. The Board, and each committee of the Board, has the authority to engage independent consultants and advisors at the Company’s expense.

Communications with the Board/ Annual Meeting Attendance

The Board has established a process by which you may send communications to the Board. You may send communications to our Directors, including any concerns regarding Ford’s accounting, internal controls, auditing, or other matters, to the following address: Board of Directors, Ford Motor Company, P.O. Box 685, Dearborn, MI 48126-0685 U.S.A. You may submit your concern anonymously or confidentially. You may also indicate whether you are a shareholder, customer, supplier, or other interested party. Communications relating to the Company’s accounting, internal controls, or auditing matters will be relayed to the Audit Committee. Other communications will be relayed to the Nominating and Governance Committee. Communications will be referred to other areas of the Company for handling as appropriate under the facts and circumstances outlined in the communications. Ford will acknowledge receipt of all communications sent to the address above that disclose a return address. You may also find a description of the manner in which you can send communications to the Board on the Company’s website (www.ford.com).

All members of the Board are expected to attend the annual meeting, unless unusual circumstances would prevent such attendance. Last year, eleven out of the twelve nominated directors attended the annual meeting.

Management Stock Ownership

The following table shows how much Ford stock each director, nominee, and Named Executive beneficially owned as of February 1, 2007. No director, nominee or executive officer, including Named Executives, beneficially owned more than 0.34% of Ford’s total outstanding common stock. Directors and executive officers as a group, including the Named Executives, beneficially owned 0.71% of Ford common stock as of February 1, 2007. These persons held options exercisable on or within 60 days after February 1, 2007 to buy, and/or beneficially owned as of February 1, 2007 Trust Preferred Securities convertible into, 15,021,639 shares of Ford common stock.

Notes

⁽¹⁾Amounts shown include restricted shares of common stock issued under the Restricted Stock Plan for Non-Employee Directors, as follows: 2,098 shares each for Kimberly A. Casiano, Edsel B. Ford II, Irvine O. Hockaday, Jr., and Ellen R. Marram; and 700 shares each for Richard A. Manoogian and Homer A. Neal.

For executive officers, included in the amounts for “All Directors and Executive Officers as a group” are Restricted Stock Equivalents issued under the 1998 Plan as long-term incentive grants in 2006 and prior years for retention and other incentive purposes.

Also, amounts shown include restricted shares of common stock issued under the 1998 Plan as follows: 65,928 shares for Edsel B. Ford II as payment for his services pursuant to a consulting agreement with the

Company (see p. 25). In addition, amounts shown include Restricted Stock Equivalents issued under the 1998 Plan as follows: 632,587 equivalents for William Clay Ford, Jr., as a bonus award in March 2006 for 2005 performance; 231,166 equivalents for James J. Padilla as a bonus award in March 2006 for 2005 performance; and 20,583 equivalents each for Donat R. Leclair, Mark Fields, and Mark A. Schulz and 12,939 equivalents for Lewis W. K. Booth as a bonus award in March 2006 for 2005 performance.

⁽²⁾In addition to the stock ownership shown in the table above: Edsel B. Ford II has disclaimed beneficial ownership of 67,463 shares of common stock and 48,850 shares of Class B Stock that are either held directly by his immediate family, in trusts for children of his in which he is the trustee, by charitable funds which he controls or by members of his immediate family in custodial or conservatorship accounts for the benefit of other members of his immediate family. William Clay Ford, Jr., has disclaimed beneficial ownership of 145,736 shares of common stock and 249,934 shares of Class B Stock that are either held directly by members of his immediate family, in a trust for a child of his in which he is the trustee or by members of his immediate family in custodial accounts for the benefit of other members of his immediate family. Present directors and executive officers as a group have disclaimed beneficial ownership of a total of 213,199 shares of common stock and 298,784 shares of Class B Stock.

Also, on February 1, 2007 (or within 60 days after that date), the Named Executives and directors listed below have rights to acquire shares of common stock through the exercise of stock options under Ford’s stock option plans and/or through conversion of Trust Preferred Securities, as follows:

The amounts of common stock shown above for Mr. Manoogian are a result of his ownership of Trust Preferred Securities, which are convertible into Ford common stock. In Mr. Manoogian’s case, he is deemed to be the beneficial owner of certain Trust Preferred Securities as a result of his being a trustee of a charitable foundation that owns the Trust Preferred Securities. Amounts of common stock shown above for Mr. Ford are a result of his ownership of stock options and Trust Preferred Securities. Additionally, Mr. Manoogian pledged as security 200,000 shares of common stock held in a trust of which he is a trustee.

⁽³⁾Pursuant to SEC filings, the Company was notified that as of December 31, 2006, the following entities had more than a 5% ownership interest of Ford common stock, or owned securities convertible into more than 5% ownership of Ford common stock, or owned a combination of Ford common stock and securities convertible into Ford common stock that could result in more than 5% ownership of Ford common stock: Brandes Investment Partners, L.P., 11988 El Camino Road, Suite 500, San Diego, California 92130, and certain of its affiliates, owned 165,642,006 shares of common stock (9.1%); Capital Research and Management Company, 333 South Hope Street, Los Angeles, California 90071, and certain affiliates owned 128,128,060 shares of common stock (6.8%) (71,283,290 of such shares are the result of ownership of securities convertible into Ford common stock); and United States Trust Company, 114 West 47th Street, 25th Floor, New York, New York 10036, and certain affiliates, owned 314,060,336 shares of common stock (17.3%) (includes shares deemed to be owned by virtue of United States Trust Company’s status as investment manager under Ford’s 401(k) plans).

⁽⁴⁾In general, these are common stock units credited under a deferred compensation plan and payable in cash. For Alan Mulally, included are 600,000 Restricted Stock Units payable in cash that were granted to him under the 1998 Plan in connection with his appointment as President and CEO of Ford.

⁽⁵⁾As of February 1, 2007, the following persons owned more than 5% of the outstanding Class B Stock: Lynn F. Alandt, c/o Ford Estates, Dearborn, Michigan, beneficially owned 9,007,705 shares (12.71%) and William Clay Ford, c/o Ford Estates, Dearborn, Michigan, beneficially owned 11,072,618 shares (15.63%). In addition to the above, George A. Straitor, c/o Ford Estates, Dearborn, Michigan controlled 4,109,132 shares (5.80%) as trustee of various trusts. Mr. Straitor disclaims beneficial ownership of these shares.

Of the outstanding Class B Stock, 51,674,255 shares are held in a voting trust of which Edsel B. Ford II, William Clay Ford, and William Clay Ford, Jr. are among the trustees. The trust requires the trustees to vote the shares as directed by a plurality of the shares in the trust. Edsel B. Ford II is a nephew and William Clay Ford, Jr. is the son of William Clay Ford.

Impact Resulting From Spin-off of Associates First Capital Corporation and Visteon Corporation and Implementation of the Value Enhancement Plan

The value of the Company’s common stock changed as a result of:

To account for these changes in value, the following items held by officers or directors of the Company as of April 9, 1998, June 28, 2000 and August 2, 2000, respectively, were adjusted in each case to ensure that the aggregate value of the item before and after each of these events would be approximately equal: common stock units, deferred contingent credits, Performance Stock Rights, Restricted Stock Equivalents, and stock options. (References in this proxy statement to any of these items that were issued before August 2, 2000 are to the adjusted amounts.)

Section 16(a)

Beneficial Ownership Reporting Compliance

Based on Company records and other information, Ford believes that all SEC filing requirements applicable to its directors and executive officers were complied with for 2006 and prior years, except that, due to clerical oversight by the Company, James C. Gouin, while he was Vice President and Controller, had one late report of one transaction, Mark A. Schulz, Executive Vice President and President, International Operations, had one late report of one transaction, and J C. Mays, Group Vice President and Chief Creative Officer, had one late report of one transaction.

Director Compensation⁽¹⁾

⁽¹⁾Standard Compensation Arrangements

Fees. From January 2006 through July 12, 2006, the following fees were paid to directors who were not Ford employees:

On July 13, 2006, the Board of Directors voluntarily reduced Board fees payable to non-employee directors by half. Accordingly, the following fees are paid to non-employee directors since July 13, 2006:

Deferred Compensation Plan. Under this plan, 60% of a director’s annual Board membership fee must be deferred in common stock units. Directors also can choose to have the payment of all or some of the remainder of their fees deferred in the form of cash and/or common stock units. Each common stock unit is equal in value to a share of common stock and is ultimately paid in cash. These common stock units generate Dividend Equivalents in the form of additional common stock units (if dividends are paid on common stock). These units are credited to the directors’ accounts on the date common stock cash dividends are paid. Any fees deferred in cash are held in the general funds of the Company. Interest on fees deferred in cash is credited semi-annually to the directors’ accounts at the then-current U.S. Treasury Bill rate plus 0.75%. In general, deferred amounts are not paid until after the director retires from the Board. The amounts are then paid, at the director’s option, either in a lump sum or in annual installments over a period of up to ten years.

Restricted Stock Plan. Effective July 1, 2004, Ford amended the Restricted Stock Plan for Non-Employee Directors providing for its termination, except with respect to outstanding grants of restricted stock and stock equivalents. Each non-employee director who had served for six months received 3,496 shares of common stock subject to restrictions on sale. In general, the restrictions expire for 20% of the shares each year following the year of the grant. No new grants of restricted stock will be made under the plan.

Insurance. Ford provides non-employee directors with $200,000 of life insurance and $500,000 of accidental death or dismemberment coverage. The life insurance coverage continues after the director retires from the Board if the director is at least 55 years old and has served for at least five years. A director who retires from the Board after age 70 or, after age 55 with Board approval, and who has served for at least five years, may elect to have the life insurance reduced to $100,000 and receive $15,000 a year for life. The accidental death or dismemberment coverage may, at the director’s expense, be supplemented up to an additional $500,000 and ends when the director retires from the Board.

Evaluation Vehicle Program. We provide non-employee directors with the use of up to two Company vehicles free of charge. Directors are expected to provide evaluations of the vehicles to the Company.

⁽²⁾As indicated in footnote 1, under “Deferred Compensation Plan,” non-employee directors are required to defer at least 60% of their annual Board membership fee. The following summarizes director deferrals for 2006: Messrs. Bond, Butler, and Manoogian, Ms. Casiano, Edsel B. Ford II, and Dr. Neal: $90,000 each; Messrs. Ollila and Thornton: $150,000 each; Mr. Hockaday: $123,750; Ms. Kravis: $62,500; Ms. Marram: $121,876; Mr. Reichardt: $60,000; and Mr. Rubin: $116,667.

⁽³⁾The amounts shown for Messrs. Bond and Thornton reflect the expense recognized pursuant to FAS 123R for the lapse of restrictions and conversion into common stock of 700 Restricted Stock Equivalents awarded pursuant to the Restricted Stock Plan for Non-Employee Directors (see footnote 1 above). The amounts shown also reflect the FAS 123R grant date fair value of these awards.

The amount shown for Edsel B. Ford II reflects the expense recognized pursuant to FAS 123R due to grants of restricted shares of common stock awarded under the 1998 Plan pursuant to a January 1999 consulting agreement between the Company and Mr. Ford. The amount shown also reflects the grant date fair value calculated pursuant to FAS 123R of these awards. Under the agreement, the consulting fee is $125,000 per calendar quarter, payable in restricted shares of common stock. The restrictions on the shares lapse one year from the date of grant and are subject to the conditions of the 1998 Plan. Mr. Ford is available for consultation, representation, and other duties under the agreement. Additionally, the Company provides facilities (including office space), an administrative assistant, and security arrangements. This agreement will continue until either party ends it with 30 days’ notice.

Stock awards outstanding at December 31, 2006, for each of the directors listed above consisted of restricted shares of common stock issued under the Restricted Stock Plan for Non-Employee Directors, as follows: 2,098 shares each for Ms. Casiano, Edsel B. Ford II, Mr. Hockaday, and Ms. Marram; and 700 shares each for Mr. Manoogian and Dr. Neal.

⁽⁴⁾The following table summarizes those amounts shown in column (d).

All Other Compensation in 2006

⁽ⁱ⁾The amount shown for Mr. Bond reflects fees paid pursuant to a consulting agreement with the Company dated September 13, 2006. Under the agreement, Mr. Bond serves as a consultant and senior advisor to the Executive Chairman, working on financial and other matters. The consulting fee is $25,000 per day for actual days worked, payable in arrears. Total fees will not exceed $262,500 for any twelve month period, unless specifically agreed to by the Company and Mr. Bond. Either party may terminate the agreement at any time. During the term of the agreement, Ford will reimburse Mr. Bond for customary and reasonable business-related expenses, travel and lodging, consistent with Company policies. While the agreement is in effect, the Company will provide Mr. Bond with an office and other incidental support in connection with the services to be provided under the agreement.

The amount shown for Dr. Neal reflects fees paid as a member of the board of managers of Ford Global Technologies, LLC, a wholly-owned entity that manages the Company’s intellectual property. As a non-employee member of such board, Dr. Neal receives the customary fees paid to non-employee members. Currently, the fees are: Annual Fee: $10,000, Attendance Fee: $1,000 per meeting. Dr. Neal attended both meetings of the board of managers of Ford Global Technologies during 2006.

⁽ⁱⁱ⁾All amounts shown in this column reflect the cost of evaluation vehicles provided to Directors (see footnote (1) above). We calculate the aggregate incremental costs of providing the evaluation vehicles by estimating the lease fee of a comparable vehicle under our Management Lease Program. The lease fee under that program takes into account the cost of using the vehicle, maintenance, license, title and registration fees, and insurance.

⁽ⁱⁱⁱ⁾The amounts in this column reflect the cost of providing Accidental Death and Dismemberment insurance discussed in footnote (1) above.

Certain Relationships and Related Transactions

Since January 1993, Ford has had a consulting agreement with William Clay Ford. Under this agreement, Mr. Ford is available for consultation, representation, and other duties. For these services, Ford pays him $100,000 per year and provides facilities (including office space), an administrative assistant, and security arrangements. This agreement will continue until either party ends it with 30 days’ notice.

Steven G. Lyons retired as a Group Vice President of the Company on March 1, 2006. On January 18, 2006, the Company and Mr. Lyons entered into an agreement whereby the Company intends to approve him, or an entity owned by him, to become an authorized Ford dealer on or before July 1, 2008. The agreement is subject to various conditions, including meeting standard Company appointment criteria and construction of dealership facilities.

In February 2002, Ford entered into a Stadium Naming and License Agreement with The Detroit Lions, Inc., pursuant to which we acquired for $50 million, paid by us in 2002, the naming rights to a new domed stadium located in downtown Detroit at which the Lions began playing their home games during the 2002 National Football League season. We named the stadium “Ford Field.” The term of the naming rights agreement is 25 years, which commenced with the 2002 National Football League season. Benefits to Ford under the naming rights agreement include exclusive exterior entrance signage and predominant interior promotional signage. In June 2005, the naming rights agreement was amended to provide for expanded Ford exposure on and around the exterior of the stadium, including the rooftop, in exchange for approximately $6.65 million to be paid in varying installments over the next ten years, of which $500,000 was paid during 2006. The Company also agreed to provide to the Lions, at no cost, eight new 2005 model year Ford, Lincoln or Mercury brand vehicles manufactured by Ford in North America for use by the management and staff of Ford Field and the Lions and to replace such vehicles in each second successive year, for the remainder of the naming rights agreement. William Clay Ford is the majority owner of the Lions. In addition, William Clay Ford, Jr., is one of five minority owners and is a director and officer of the Lions.

Paul Alandt, Lynn F. Alandt’s husband, owns a Ford-franchised dealership and a Lincoln-Mercury-franchised dealership. In 2006, the dealerships paid Ford about $58.8 million for products and services in the ordinary course of business. In turn, Ford paid the dealerships about $13.4 million for services in the ordinary course of business. Also in 2006, Ford Motor Credit Company, a wholly-owned subsidiary of Ford, provided about $70.4 million of financing to the dealerships and paid $425,658 to them in the ordinary course of business. The dealerships paid Ford Credit about $66.9 million in the ordinary course of business. Additionally, in 2006 Ford Credit purchased retail installment sales contracts and Red Carpet Leases from the dealerships in amounts of about $9.2 million and $39.1 million, respectively.

Mr. Alandt also owns a Volvo franchised dealership. Volvo Cars is a wholly-owned entity of Ford. During 2006 the dealership paid Volvo Cars about $8.7 million for products and services in the ordinary course of business. In turn, Volvo Cars paid the dealership about $1.6 million for services in the ordinary course of business. Also in 2006, Ford Credit provided about $9.8 million of financing to the dealership and paid $17,459 to it in the ordinary course of business. The dealership paid Ford Credit about $14.3 million in the ordinary course of business. Additionally, in 2006 Ford Credit purchased retail installment sales contracts and retail leases from the dealership in amounts of about $540,000 and $4.7 million, respectively.

Effective October 31, 2006, Steven K. Hamp, former Vice President and Chief of Staff, and a brother-in-law of William Clay Ford, Jr., left Company employment. Pursuant to his employment agreement, Mr. Hamp received, in addition to his salary through October 31, 2006, a severance payment in an amount equal to his annual base salary ($400,000) plus a pro rata portion of the bonus ($69,325) paid under the Company’s Annual Incentive Compensation Plan for 2006. Additionally, earlier option grants of 50,000 options and 22,000 options were cancelled as of October 31, 2006. While an employee in 2006, approximately $55,000 was credited to Mr. Hamp’s non-qualified deferred compensation plan.

Edsel B. Ford II owns Pentastar Aviation, Inc., an aircraft charter and management and maintenance company. During 2006, the Company paid Pentastar, or its affiliates, approximately $130,000 for services provided to the Company in the ordinary course of business.

In March 2001, Marketing Associates, LLC, an entity in which Edsel B. Ford II has a majority interest, acquired all of the assets of the Marketing Associates Division of Lason Systems, Inc. Before the acquisition, the Marketing Associates Division of Lason Systems, Inc. provided various marketing and related services to the Company. In 2006, the Company paid Marketing Associates, LLC approximately $23.7 million for marketing and related services provided in the ordinary course of business.

Pursuant to SEC filings, the Company was notified that as of December 31, 2006, Brandes Investment Partners, L.P., 11988 El Camino Road, Suite 500, San Diego, California 92130, and certain of its affiliates (“Brandes”) owned approximately 9.1% of the common stock of the Company. During 2006, the Company paid Brandes approximately $7.9 million in the ordinary course of business.

Pursuant to SEC filings, the Company was notified that as of December 31, 2006, Capital Research and Management Company, 333 South Hope Street, Los Angeles, California 90071, and certain affiliates (“Capital Research”), owned approximately 6.8% of common stock (71,283,290 of such shares are the result of ownership of securities convertible into common stock). During 2006, the Company paid Capital Research approximately $22.5 million in the ordinary course of business.

Pursuant to SEC filings, the Company was notified that as of December 31, 2006, United States Trust Company, 114 West 47th Street, 25th Floor, New York, New York 10036, and certain affiliates (“U.S. Trust”), owned approximately 17.3% of common stock (includes shares deemed to be owned by virtue of United States Trust Company’s status as investment manager under Ford’s 401(k) plans). During 2006, the Company paid U.S. Trust $1.1 million in the ordinary course of business.

Compensation Discussion and Analysis (CD&A)

Philosophy and Objectives

Our Compensation Committee establishes and reviews our overall executive compensation philosophy and objectives and oversees our executive compensation programs. The Committee has approved the following Philosophy Statement with respect to all salaried employees:

In addition, the Committee approved the following Strategy Statement:

The Philosophy and Strategy Statements are reviewed by the Committee at least annually. In 2006, the Committee amended the Strategy Statement to include retention of employees as an objective to emphasize the importance of this goal as we execute our turnaround plan.

The objectives of our compensation programs are to:

How We Determine Compensation

The Compensation Committee periodically reviews a report from an outside consultant on Ford’s compensation programs for executives. Towers Perrin, an outside consulting firm, prepared the most recent report in 2006. That report will be considered when making decisions on 2007 compensation. The report discusses how our program compares with those of peer companies on base salary, bonus, long-term incentives, benefits, and total compensation. The consultant develops compensation data using a survey of several leading companies that we have historically used as comparator companies, adding stability and reliability to the survey data over time. General Motors and DaimlerChrysler were included in the survey. It also included the following 20 leading companies in other industries: 3M, Alcoa, Altria Group, AT&T, Boeing, BP, Caterpillar, Chevron, Citigroup, Coca-Cola, Conoco Phillips, Dow Chemical, DuPont, ExxonMobil, General Electric, Hewlett-Packard, IBM, Johnson & Johnson, Merck, and Proctor & Gamble. These companies were picked because, like Ford, they are generally Fortune 100 manufacturing companies with comparable revenue (generally over $15 billion) whose operations are global in scope and which employ a large number of individuals in manufacturing, product engineering, and sales.

We consider the survey group data primarily to ensure that our executive compensation program as a whole is competitive when the Company achieves targeted performance levels. Although our goal is to provide compensation opportunities at or around the survey group’s median compensation, including salary, annual bonus and long-term incentives, we also incorporate flexibility into our compensation programs and in the assessment process to respond to, and adjust for, the evolving business environment and individual circumstances.

For executive officers in 2006, salaries generally were higher than the median of the survey companies, and we expect our annual bonus and long-term incentives generally to pay out below the median of the survey group due to performance results against our goals and overall financial constraints.

Total Compensation

Our total compensation program for executive officers consists of the following elements:

In addition, the Compensation Committee awards cash, stock options, restricted or unrestricted stock, and/or Restricted Stock Equivalents (“RSEs”) to key high performing executives when it deems it appropriate for retention or incentive purposes. These special awards, discussed in more detail below, may be performance-based.

We intend to continue to provide competitive compensation while offering programs that emphasize our key goals of rewarding performance and encouraging retention of key talent. To achieve these goals, compensation paid to our executives is structured to ensure that there is an appropriate balance between: (i) long-term and short-term performance-based compensation; (ii) cash and non-cash forms of compensation; (iii) the different forms of equity-based and other non-cash compensation; (iv) Company performance, individual performance, shareholder return, and other performance metrics; and (v) cost and expected benefit to the Company.

Each year, the Committee reviews all components of compensation, both recent historical and prospective, of William Clay Ford, Jr., Alan Mulally, and the other executive officers. Data on each component of total compensation are prepared by the Company’s Human Resources department and reviewed by the Committee at least annually. The Committee also takes into account relative pay considerations within the officer group. In addition, the Committee uses a variety of tools covering internal performance as well as data concerning pay equity and external compensation.

While the Committee also considers recommendations from Mr. Ford, Mr. Mulally, and the Group Vice President — Corporate Human Resources and Labor Affairs regarding development of compensation plans, final decisions on any major element of compensation, as well as total compensation for other executive officers, are made by the Compensation Committee.

Annual Compensation

Annual compensation for our executives includes salary and incentive bonus paid in cash.

A. Salaries

We view salaries as an essential component of a compensation package that also includes performance-based incentive compensation that is at risk. In addition, consistent with our compensation Philosophy and Strategy Statements, we believe that competitive salaries help attract, retain, and motivate good performers. When

considering salaries, the Compensation Committee takes into account factors such as the individual’s job duties, performance and achievements, level of pay compared to companies in the survey group and similar positions of responsibility within the Company, job tenure, retention concerns, and critical skill sets, as applicable.

The Compensation Committee reviews salaries of the Named Executives annually and at the time of a promotion or other major change in responsibilities. As part of our objective to control costs, we did not increase salaries for any of the Named Executives in 2006.

B. Incentive Bonuses

The Annual Incentive Compensation Plan (“AICP”) provides for annual cash awards to participants based on achievement of performance goals relating to a specific year. No awards are paid if a certain level of performance is not met.

For 2006, the Committee set a bonus formula that, for most participants, was based on total company pre-tax profits, as well as pre-tax profits, cost performance, market share, and quality metrics for the relevant business unit. Performance against target goals established for each of these criteria was weighted 75% for total Company and business unit pre-tax profits and 25% for business unit cost performance, market share, and quality. This structure emphasized profit goals, while recognizing that other metrics also are key drivers to long-term business success. The bonus formula has a sliding scale, based on various levels of achievement for each metric.

Specific goals were developed based on achieving key 2006 objectives identified as top priorities for the year and necessary for our turnaround plan. For participants, including certain executive officers, assigned to the Corporate business unit because their job responsibilities encompass multiple business units, the performance criteria used for 2006 included attaining specified levels of our total pre-tax profits, our total cost performance, our total market share, and our total quality metrics. At the time the goals were set, we believed that, given the state of the Company, the goals would be difficult but achievable with significant effort.

Under the Plan, the Committee sets target awards for each officer based on the individual’s level of responsibility and the maximum Company performance level. When setting the target amounts for 2006, the Committee also considered competitive compensation data, relative pay considerations within the officer group, and the target amounts set for 2005, as well as the need for flexibility to motivate and reward exceptional performance while maximizing the deductibility of any amounts earned by following the shareholder approved terms for the program.

The 2006 target awards for participating Named Executives were three times base salary, except that the target for Mr. Padilla was 3.75 times base salary due to his job responsibilities and leadership role. (See Grants of Plan-Based Awards in 2006 Table on p. 48.) The target amounts were the maximum that could be paid if the Company exceeded its performance goals and reached the maximum performance level under the Plan; the Committee may reduce, but not increase, awards for Named Executives from the formula amount under the Plan. For Named Executives, awards could have ranged between 0% and 100% of the target award, depending on actual performance achieved.

The tables below show the performance metrics and formula weightings for each business unit (and Named Executives assigned to the unit) and the performance results against the metrics for 2006. The Committee reviewed Ford’s performance during 2006 against the goals. Based on this performance, the Committee determined the

percentage of each of the five performance goals achieved and the percent of the target award earned for each corporate business group (“CBG”) in which any Named Executive participated.

Each of the participating Named Executives was assigned to the specific business unit shown below based on job responsibilities and scope. For Mr. Schulz and Mr. Booth, since their job responsibilities encompass multiple business units (but are not completely “Corporate” in nature), their total AICP factor is split among more than one business unit.

Due to our financial condition and the need to conserve cash, and due to a reduction in the number of participants, for 2006, the Committee decided to set aside up to $59 million for the payment of bonuses under the plan, which is $7.5 million less than the formula amount based on performance results. All Named Executives who received a bonus for 2006 received significantly less than the formula amount. In addition, we prorated Mr. Padilla’s bonus based on months of service in 2006. See column (g) of the Summary Compensation Table and footnote 4 on pp. 45-46. No award was made to Mr. Ford pursuant to a May 2005 agreement or to Mr. Mulally who was hired on September 1, 2006. See “Executive Chairman Compensation” on p. 42 and “President and CEO Compensation” on pp. 42-43.

For 2007, the Committee made changes to the AICP program, described below under “Changes to Incentive Compensation Programs for 2007” on pp. 38-39.

Special 2005 Retention Arrangement

We paid Mark Fields, our Executive Vice President and President, The Americas, $1 million as a retention payment in October 2005. Mr. Fields agreed that if he voluntarily leaves the Company within 24 months of the payment, he must repay the $1 million within two weeks of his departure.

Long-Term Compensation

Our long-term incentive awards are tied to our performance and the value of our common stock over several years. These awards are intended to focus executive behavior on our long-term interests, because today’s business decisions affect Ford over a number of years.

In 2005, the Committee took a fresh look at the amount of options to be granted in the mix of long-term incentives, considering the incentive/reward opportunity and history of little or no stock appreciation value, the perceived value of the options by executives, the need for more powerful behavior-changing incentives, and the need to focus on other critical operational performance metrics, as well as provide a balance with certain other metrics. Accounting and tax implications also were considered. As a result of this review, the Committee decided in 2005 to replace the value of 50% of the stock option grant (based on Black-Scholes valuation) that the executive otherwise would have received with performance-based RSEs. This practice was continued in 2006.

For 2006, our long-term incentive compensation program had three basic elements: stock options, Performance Stock Rights, and performance-based RSEs. The stock options have a ten year term and function as the longest-term incentive. Performance Stock Rights, which focus on some of the same metrics used in the AICP, cover a three-year performance period and function as an intermediate-term incentive. The RSEs are awarded based on a one-year performance period, but are paid out in service-based restricted stock, which adds a one-year retention element.

A. Restricted Stock Equivalents and Stock Options

In 2006, the Committee generally granted performance-based RSEs and ten-year stock options to Vice Presidents and above. In general, the total value of these grants was determined based on the person’s job and expected role in our long-term performance, our special retention needs, our historical share allocations, the number of options granted to the person in the prior year, and the total number of options awarded to our employees.

Performance-based RSEs are intended to complement the stock option program and reward important achievements in areas the Committee identified as critical drivers of long-term success necessary to promote our turnaround plan. In approving the use of performance-based RSEs and the 50/50 allocation mentioned above, the Committee also considered various alternatives to stock options and a number of related factors, such as accounting and tax treatment of alternatives to both the Company and recipients, option overhang, potential share dilution, competitive pay practices, and the lack of unrealized gains on prior stock option grants. The Committee determined that the 50/50 split between options and performance-based RSEs provides employees with value for their performance while maintaining alignment with your interests.

To motivate executives to achieve the specific objectives, the Committee selected the metrics and the related weightings shown below for the performance-based RSEs to ensure alignment with 2006 critical priorities. At the time the goals were set, we believed that, given the state of the Company, the goals would be difficult (especially the “Company performance” goals shown below) but achievable with significant effort. The Committee recognized that

some judgment would be needed to assess nonquantitative objectives. The metrics, weight, and percentage of goal achieved are shown below.

Based on these performance results, the Committee determined that 62% of the maximum value of the RSEs had been earned by the participants. To recognize our emphasis on teamwork, the Committee decided to award the same percentage of the award opportunity to each of the participants. Mr. Ford did not receive an award pursuant to a May 2005 agreement. In addition, Mr. Mulally was hired in September 2006 and did not participate. The RSEs have a one-year restriction period and pay Dividend Equivalents in cash during the restriction period, if dividends are paid on our common stock during the period. No Dividend Equivalents were paid during the 2006 performance period for this award opportunity. Following the restriction period of one year, shares of Ford common stock will be issued, less any shares withheld to cover tax withholding.

B. Performance Stock Rights

2006 Grants for 2006-2008 Performance Period

In 2006, the Committee granted Performance Stock Rights to our officers and certain other top executives. These Performance Stock Rights cover the performance period 2006-2008 and, like prior Performance Stock Right grants, pay Dividend Equivalents in cash (if we pay dividends on our common stock) based on 100% of the targeted payout. See the Grants of Plan-Based Awards Table in 2006 on p. 48. Awards of our common stock may range from 0% to 150% of the targeted payout after this period ends. At the time the goals were set, we believed that, given the

state of the Company, the goals would be difficult but performance resulting in a Final Award could be accomplished with hard work. The Committee will determine the awards based on the level of achievement of specific goals relating to the metrics shown below.

* Excludes special items.

The Committee adopted the performance metrics for Performance Stock Rights to ensure alignment with our top priorities and made one change commencing with the 2006-2008 performance period as compared to prior periods. The Committee replaced the “customer satisfaction at three years in service” metric with “things gone wrong at three months in service” due to the large historical variation of the former metric. Since all five of the metrics are important to our long-term success, each of the five metrics was weighted equally at 20%. The minimum payout threshold for any metric is 50% (representing 10% of the total targeted payout). Gains or amounts realizable from prior stock awards were not a factor in deciding to award Performance Stock Rights.

The metric of our common stock performance compared to other S&P 500 companies focuses executive behavior on creating shareholder value over the long-term. This shareholder return metric has historically been used by us and also is commonly used by peer companies. The total cost performance metric focuses executives on continually seeking efficiencies in running the business. The global market share metric focuses executives on producing products that customers will buy. The things gone wrong at three months and launch customer satisfaction metrics emphasize the high quality necessary in order to compete in the global auto industry.

The size of an officer’s Performance Stock Rights grant depends on the person’s level of responsibility, the person’s expected role in Ford’s long-term performance, and our historical share allocations for this program.

Final Awards for 2004-2006 Performance Period

The 2006 Final Awards of common stock under the 1998 Plan covered Performance Stock Rights granted for the 2004-2006 performance period and were paid out in March 2007. The terms of these grants, including the performance metrics and formula, were established in 2004. The Committee reviewed our performance during the 2004-2006 period against the goals shown below.

* Excludes special items.

Based on this performance, the Plan formula resulted in awards of 39% of the shares covered by the Performance Stock Rights held by the participants, including the Named Executives, except Mr. Ford and Mr. Mulally who did not participate in this program. At the time the goals were set, we believed that, given the state of the Company, the goals would be difficult but performance resulting in a Final Award could be accomplished with hard work.

The Plan allows the Committee to use its discretion to decrease, but not increase, final awards from the formula amount for Named Executives. The amounts awarded as Final Awards to the Named Executives listed above for the 2004-2006 performance period were determined by formula, with no discretion used.

C. Special 2006-2008 Senior Executive Retention Incentive Arrangement

In 2006, the Committee established a special retention incentive for certain members of senior management, selected because of their key role in leading efforts to accomplish our key initiatives during the 2006-2008 period. All of the Named Executives, other than Mr. Ford and Mr. Mulally, participated in this program; Mr. Padilla became ineligible for an award due to his retirement.

The Committee set the value of the final award opportunity for each participant at four times base salary in order to provide a powerful incentive for achieving the key initiatives. The opportunity to earn the award was based on accomplishment of specific objectives relating to the Way Forward Plan and other key goals, including some or all of the following criteria:

Each of these metrics was designed to influence executive behavior to transform Ford’s business into a more efficient global enterprise. At the time the goals were set, we believed that, given the state of the Company, the goals would be hard to accomplish, but could be met if we focused on these priorities. Final awards would have been paid in restricted stock in the first quarter of 2009 and would have had a two-year restriction period, during which time dividends were to be paid (if we paid dividends on common stock). No dividends or Dividend Equivalents would be paid during the performance period.

The specific metrics for those Named Executives who participated in the program are identified by reference to the metric numbers listed above.

The Committee decided to settle this program in March 2007. The program was viewed as inconsistent with our strategic need to have our executives work together as a team to achieve common goals. The consideration for settling the program was a cash payout made to participants based on actual and expected achievement of the manufacturing capacity reduction goals for 2006-2008 and, for the other goals shown below, actual 2006 achievement.

As a result, the following Named Executives received cash payments based on the following percentage of their respective performance achieved: Mr. Fields (45.75%), Mr. Schulz (0%), Mr. Leclair (33%), and Mr. Booth (50%). See Column (g) of the Summary Compensation Table and footnote 4 thereto on pp. 45-46. Participants must repay the settlement amount if they leave the Company before January 2009 for any reason, except an approved retirement.

In addition, we decided to grant additional stock options in March 2007 and performance-based Restricted Stock Units in March 2007, March 2008, and March 2009, respectively, to certain officer participants, including certain of the Named Executives, as an enhancement under the long-term incentive program. We reduced the award opportunity (set at eight times base salary rounded to the nearest million) for individual participants by the amount of their cash payout, if any, for the 2006-2008 Senior Executive Retention Incentive Arrangement. The value of the net amount of the award opportunity will be delivered 50% in stock options and 50% in performance-based Restricted Stock Units. Each grant of performance-based Restricted Stock Units will use the same metrics and weightings as the AICP for the applicable performance period. The final awards will be in the form of Restricted Stock Units. No Dividend Equivalents will be paid on the units during the performance period or restriction period. Awards for 2007, 2008, and 2009 will have a three year, two year, and one year restriction period, respectively. Following the restriction period, shares of common stock will be issued, less any shares withheld for tax withholding. (See “Changes to Incentive Compensation Programs for 2007” on pp. 38-39.)

D. Timing of Awards; Option Exercise Price Determination

Historically, annual grants of stock options, Final Awards relating to Performance Stock Rights, and final awards of RSEs relating to performance results typically were determined at the regularly scheduled March Compensation Committee meeting when the Committee had data available to determine the amount of the final stock-based awards. At that time, the Committee decides the effective date of the awards, typically two business days following the March Committee meeting, which provides administrative time for preparing SEC reports and communicating the grant information. The release of earnings information for the prior fiscal year is sufficiently in advance of the annual grant date for the public to be aware of the information.

The Committee does not set the equity grant dates in order to affect the value of the compensation. Executive officers did not play a role in the selection of the grant dates. For special grants, whether approved by the

Compensation Committee for officers or the Long-Term Incentive Compensation Award Committee for non-officers, grants are effective either on a specified future date (e.g., a date that coincides with a promotion or hiring date, or quarterly grant date), or the date of approval, which in the case of an approval by written consent cannot be earlier than the date when the Committee member approvals have been obtained. See “Corporate Governance — Compensation Committee Operations” at p. 19 for more information on the Long-Term Incentive Compensation Award Committee.

Due to administrative complexity relating to valuation and notification matters, on February 27, 2007, the Committee approved the annual 2007 stock-based awards or grants with an effective date of March 5, 2007.

Under the 1990 and 1998 Long-Term Incentive Plans, the terms of which were approved by you, the exercise price of the options is the average of the high and low trading prices of the common stock traded on the NYSE on the effective date of the grant. For exercise prices of the 2006 option grants, see column (l) of the Grants of Plan-Based Awards in 2006 Table on p. 48.

Stock Ownership Goals

In 1994, the Compensation Committee created stock ownership goals for executives at or above the Vice President level to further align the interests of the executives with those of shareholders. For Vice Presidents and Senior Vice Presidents, the goal is ownership of common stock worth an amount equal to salary; Group Vice Presidents have a goal of two times salary; Executive Vice Presidents, three times salary; and the President and CEO and Executive Chairman, five times salary. Executives have five years from taking their position to achieve their goal.

We review progress toward achievement of the ownership goals periodically. All forms of stock ownership — including directly and indirectly owned shares of common stock, final awards of stock equivalents, dividend equivalents payable in stock, and units that are based on common stock — count toward the goal. Historically and currently, Mr. Ford has exceeded his goal. All of the other Named Executives are still within the five year period to achieve their goals.

Changes to Incentive Compensation Programs for 2007

We recently conducted a review of our incentive compensation programs. The Committee’s outside consulting firm, Semler Brossy Consulting Group, LLC, assisted in the review at the request of the Committee. The review considered the current business situation, our long and short-term priorities, proposed performance emphasis for various elements of compensation, the mix and form of long-term incentives, cost comparison analysis, stakeholder considerations, and the pros and cons of different stock-based awards. In addition, senior leadership of the Company participated in discussions and emphasized the importance for executives to act as one cohesive team with common metrics. As a result of the review and analysis, the Committee decided to make the following changes to incentive compensation for executive officers for 2007, including the Named Executives (other than Mr. Ford who is not receiving any new compensation pursuant to his May 2005 agreement):

In addition, effective June 1, 2007, we are reinstating our matching contributions for salaried employees in the U.S. under the Savings and Stock Investment Plan for Salaried Employees (“SSIP”). This action will help offset the impact of cancelling the 2007 annual salary merit program for salaried employees in the U.S. and is consistent with competitive pay practices. We will match in cash $.60 on each dollar contributed up to 5% of base salary. Employees may elect how to invest these amounts. If no option is selected, our matching contribution will be invested in the Interest Income Fund.

Retirement Plans

Our General Retirement Plan (“GRP”) provides a tax-qualified benefit for each year of non-contributory participation by employees in the United States hired before January 1, 2004, and added benefits for those who make contributions. We also have two other non-qualified retirement plans for such employees: the Supplemental Executive Retirement Plan (“SERP”) and the Benefit Equalization Plan (“GRP-BEP”). Under the GRP-BEP, eligible employees receive benefits substantially equal to those that would have been provided under the GRP but that could not be provided because of Internal Revenue Code (“Code”) limitations. Each of the Named Executives, except Mr. Mulally, is eligible for benefits under the GRP, SERP, and GRP-BEP.

Certain eligible executives who separate from employment after age 55 (age 52 if retiring under our Select Retirement Plan (“SRP”)) and prior to age 65 are entitled to monthly benefits under our Executive Separation Allowance Plan (“ESAP”) until age 65. The SRP is a voluntary retirement program offered from time-to-time for select U.S. management employees. In 2006, at the Committee’s request, Semler Brossy Consulting Group, LLC and the Company jointly conducted a review of the SRP as a severance vehicle. The review compared present values of the SRP benefit with traditional severance packages, examined potential changes, and considered benefits to the Company and to executives. The Committee reviewed the report and concluded that the SRP should remain in its current form to facilitate the current reduction in work force being undertaken by the Company.

Benefits under SERP, SRP, ESAP, and GRP-BEP are not funded. In addition, in accordance with Code 409A, benefits that accrued or vested on or after January 1, 2005 under these plans may not be paid to certain key executives until six months following their separation from employment.

Ford has a different tax qualified retirement plan, the Ford Retirement Plan (“FRP”), for salaried employees hired or rehired on or after January 1, 2004 in the U.S. The FRP was adopted in order to provide us with more predictable retirement benefit costs and reduced financial statement volatility. These goals are achieved through a stable contribution schedule and the transfer of financial and demographic risks from us to plan participants while still providing employees with the opportunity for adequate income in retirement. Employees who participate in this plan, including Mr. Mulally, are not eligible to participate in the GRP (with respect to future service), SERP, or ESAP.

In general, we believe that these retirement plans serve several worthwhile business purposes, including attracting and retaining top leadership talent. In addition, they provide income security to long serving executives, and provide flexibility to us in transferring executives among our operations. We believe these programs to be reasonable and appropriate in light of competitive practices and our executives’ total compensation program. For additional information, see the Pension Benefits in 2006 Table on p. 57 and “Potential Payments Upon Termination or Change of Control” on pp. 60-68.

Deferred Compensation Plan

Under our Deferred Compensation Plan (“DCP”), certain salaried employees may defer up to 50% of base salary and up to 100% of awards under the AICP and certain other awards. This unfunded plan provides the opportunity to save for the future while postponing payment of income taxes on the deferred compensation.

In December 2006, the Committee approved amendments to our DCP that allowed any participating active employee to change the method and/or timing to receive a distribution under the plan in accordance with existing governmental guidance under Code Section 409A, provided that such an election was made on or before December 31, 2006. In addition, the amendments provide that on and after December 1, 2006, all deferrals under the plan are subject to Code Section 409A. The Committee recognized that certain key employees who left the Company expressed concern regarding access to their DCP funds as a factor in their decision to leave. Other key employees still with us also expressed this concern. The Committee recognized that retaining key employees, especially during the revitalization of the business, is a crucial goal and wanted to minimize employee concerns over the long-term state of their DCP accounts. The Committee determined that the potential cash outflow was containable within the business plan period. Two of the three Named Executives who were eligible to make an election chose to change their distribution elections. For more information on the Deferred Compensation Plan, see the Nonqualified Deferred Compensation in 2006 Table and related footnotes on pp. 59-60.

Perquisites and Other Benefits

We provided certain perquisites and other benefits to senior management in 2006, the most significant of which are summarized below. The Committee reviews our policies on officer perquisites on an annual basis.

Company Aircraft: During 2006, Mr. Ford, Mr. Mulally, and Mr. Padilla were required to use our aircraft for all business and personal air travel for security reasons. Mr. Padilla’s use of the aircraft ceased upon his retirement, effective July 1, 2006. The families and guests of these officers were allowed to accompany them on our aircraft. In addition, in order to ease the burden of Mr. Mulally moving to Dearborn, Michigan and away from his family in Seattle, Washington, the Compensation Committee recently clarified that his arrangement covers travel by his wife, children and guests on Company aircraft for personal reasons without him at Company expense, at his request. For retention purposes, we allowed Mr. Fields to use our aircraft to travel to and from his home on weekends. Recently, the Compensation Committee approved a request by Mr. Fields regarding a change related to his use of Company aircraft to provide that Mr. Fields no longer uses Company aircraft for personal travel. The Company pays the costs,

including first class commercial airfare, for personal travel to and from his home in Florida. The Company continues to provide tax relief as a result of the imputed income associated with this arrangement. No other executive is permitted to use our aircraft for personal reasons.

For 2006 and prior years, we valued the incremental cost of the personal use of our aircraft using a method that takes into account: (i) the variable cost per flight hour, including flight crew travel expenses; (ii) landing/parking/hangar storage expenses; and (iii) any customs, foreign permit, and similar fees. The incremental cost for personal use of Company aircraft is included in column (i) of the Summary Compensation Table on p. 45.

Evaluation Vehicle Program: We maintain a program that provides Company officers with the use of two Company vehicles free of charge. This program requires Company officers to evaluate a variety of our vehicles, providing important feedback on the design and quality of our products. The Company officers that participate in the program are required to provide written evaluations of the vehicles. Most Company officers must rotate their vehicle choices among our different vehicle brands based on a pre-determined schedule. Those Company officers whose responsibilities are focused on a particular vehicle brand are required to drive vehicles related to that brand. We calculate the aggregate incremental cost of providing the evaluation vehicles by estimating the lease fee for a comparable vehicle under our Management Lease Program. The lease fee under that program takes into account the cost of using the vehicle, maintenance, license, title and registration fees, and insurance. For the Named Executives, such cost, including related fuel, is included in column (i) of the Summary Compensation Table on p. 45.

Other Services: For certain executive officers, we provide a home security evaluation and security system. The cost of the evaluation and system is included in column (i) of the Summary Compensation Table on p. 45. We also provide an allowance to senior managers for financial counseling services and estate planning. We pay for approximately 75% of the cost of this service and it is reflected in column (i) of the Summary Compensation Table on p. 45. The safety and security (personal and financial) of our executives is critically important. We believe the benefits of providing these programs outweigh the relatively minor costs associated with them.

Post-Termination Arrangements

Mr. Padilla, our former President and Chief Operating Officer, retired effective July 1, 2006. On May 10, 2006, the Compensation Committee approved the terms of his retirement arrangement under the terms of the SRP. Mr. Padilla also receives benefits under the ESAP. In September 2003, we approved crediting 0.8 years of service to Mr. Padilla under ESAP and SERP in order to provide benefits that approximately duplicated the benefits he would have received under GRP had he not participated in a White House Fellowship Program, during which time he did not receive any pension credit under the GRP.

The retirement arrangement was confirmed in an agreement between the Company and Mr. Padilla. In addition, the agreement provided that Mr. Padilla was eligible to receive or retain certain stock-based awards. The Committee believed these arrangements to be reasonable in light of Mr. Padilla’s significant contributions over his many years of service to us. In order to provide for a smooth transition of Mr. Padilla’s duties, the Compensation Committee also approved the terms of a one-year consulting agreement between the Company and Mr. Padilla. Under the agreement, Mr. Padilla agreed to be available to serve as a consultant on special assignment to Mr. Ford. See “Potential Payments Upon Termination or Change of Control — James J. Padilla,” on pp. 67-68.

Mr. Schulz, former Executive Vice President and President, International Operations, retired effective April 1, 2007. On December 13, 2006, the Compensation Committee approved the terms of his retirement arrangement under the terms of the SRP; Mr. Schulz will also receive benefits under ESAP in 2007. He retained his eligibility for the 2006 performance-based Restricted Stock Equivalent opportunity and for non-prorated Final Awards for his outstanding Performance Stock Rights. He also was deemed to have met the minimum holding requirements for any stock-based awards following his retirement. The Committee believed these arrangements to be reasonable in light of Mr. Schulz’s significant contributions to us over the years. We did not pay Mr. Schulz a cash payment (due to the performance results for his assigned metric) or grant him any options or performance-based Restricted Stock Units

(due to his retirement) relating to the settlement of the Special 2006-2008 Senior Executive Retention Incentive Arrangement, as described on pp. 36-37.

In addition, for post-termination arrangements relating to Mr. Mulally, see “President and CEO Compensation” below.

Executive Chairman Compensation

A. Annual Compensation

In May 2005, at Mr. Ford’s request, the Committee and Mr. Ford agreed that Mr. Ford would forego any new compensation (including salary, bonus, or other awards) until such time as the Committee and Mr. Ford determine that our Automotive sector has achieved sustained profitability. As a result, he received neither salary, compensation under the AICP, nor RSEs in or for 2006.

B. Long-Term Compensation

Pursuant to the 2005 agreement, Mr. Ford was not granted any Performance Stock Rights, stock options, or RSEs or any other long-term incentive awards in or for 2006.

President and CEO Compensation

Effective September 1, 2006, we entered into an agreement with Mr. Mulally relating to his hiring as President and Chief Executive Officer. The Board of Directors approved the framework for the terms of the offer and delegated authority to Mr. Ford, the Chairman and then CEO, and Richard Manoogian, the then Acting Chair of the Compensation Committee, to negotiate the final details, which were later ratified by the Compensation Committee. The Group Vice President-Corporate Human Resources and Labor Affairs also had input into the terms of the offer. These terms were developed to assist us in recruiting, retaining, and providing incentives for Mr. Mulally to lead the Company through our Way Forward Plan. We understood that significant compensation was needed to entice Mr. Mulally, a career Boeing executive, to leave the security of his former employer in order to work for a company in the midst of a turnaround plan.

We agreed to pay Mr. Mulally a base salary of $2,000,000 per year. We also paid Mr. Mulally $7,500,000 as a hiring bonus and $11,000,000 as an offset for forfeited performance and stock option awards at his former employer. We believe these terms were necessary, competitive, and appropriate to attract an executive of Mr. Mulally’s talent and experience to lead our turnaround efforts.

We granted Mr. Mulally (i) 3,000,000 ten-year stock options that vest 33% one year after the grant date, 33% two years after the grant date, and 34% three years after the grant date, and (ii) 1,000,000 five-year performance-based stock options that vest as follows: 250,000 options vest after our common stock closes at $15 per share or more for at least 30 consecutive trading days; an additional 250,000 options vest after our common stock closes at $20 per share or more for such a period; an additional 250,000 options vest after our common stock closes at $25 per share or more for such a period; and an additional 250,000 options vest after our common stock closes at $30 per share or more for such a period. See columns (h) and (k) of the Grants of Plan-Based Awards in 2006 Table on p. 48 and column (f) of the Summary Compensation Table on p. 45. The Committee believed these awards align Mr. Mulally’s interests with your interests as shareholders and provide appropriate incentives to work toward achieving stock price appreciation.

We also granted Mr. Mulally 600,000 Restricted Stock Units. See column (j) of the Grants of Plan-Based Awards in 2006 Table on p. 48 and column (e) of the Summary Compensation Table on p. 45. One third of the units vest one, two, and three years after the grant date. If we pay dividends on our common stock, Dividend Equivalent payments will be made in cash until the restrictions lapse. When the restrictions lapse, the units will be valued based on the closing price of our common stock on the New York Stock Exchange on the date of lapse and paid out in cash as

soon as practicable thereafter. Further, we agreed that the 2007 performance-based Restricted Stock Unit opportunity and stock options granted to Mr. Mulally in March 2007 would have a minimum grant date value of $6,000,000 and $5,000,000, respectively. We also agreed that his target bonus opportunity for 2007 would be 175% of his base salary. In February 2007, after reviewing the Company’s 2006 Company performance results and Mr. Mulally’s leadership role in progressing the Way Forward Plan, the Compensation Committee decided that his March 2007 stock option grant value would be $6,000,000. These arrangements are competitive and appropriately tied to Company and stock performance. They provide a powerful incentive to achieve our objectives and reward exceptional performance. In connection with these arrangements, Mr. Mulally signed a non-compete agreement under which he agreed not to directly or indirectly work for or associate with any business that competes with Ford for two years after his voluntary termination.

If we terminate Mr. Mulally’s employment for reasons other than for cause during the first five years of his employment or if there is a change in control of the Company during the first five years of his employment and he terminates his employment for good reason, we will (i) pay Mr. Mulally severance equal to two times his annual base salary and targeted bonus, and (ii) remove remaining vesting requirements for the initial stock option grant of 3,000,000 options and the 600,000 restricted stock units. If Mr. Mulally leaves us pursuant to the above arrangements, he may not work for a competitor for five years after the date of his termination. Mr. Mulally will not be entitled to any severance payment if he is terminated for cause. See “Potential Payments Upon Termination or Change in Control — Alan Mulally” on pp. 61-63.

Mr. Mulally also was granted the option to live in temporary housing in Southeast Michigan for the first two years of employment at Company expense. He is eligible for relocation assistance pursuant to our relocation program when he relocates his household.

Tax and Other Considerations

A. Internal Revenue Code § 162(m)

Code Section 162(m) generally disallows Federal tax deductions for compensation in excess of $1 million paid to the Chief Executive Officer and the next four highest paid officers (“Covered Executives”). However, certain performance-based compensation is not subject to this deduction limitation. In our case, this exemption from the 162(m) limitation applies to certain awards under the AICP, the 1998 Plan, and the 1990 Long-Term Incentive Plan All awards of bonus, stock options, and Final Awards under Performance Stock Rights made under these plans in 2006 were below the applicable shareholder-approved limits and, therefore, deductible.

Generally, we strive to maximize the tax deductibility of our compensation arrangements. In the highly competitive market for talent, however, we believe the Committee needs flexibility in designing compensation that will attract and retain talented executives and provide special incentives to promote various corporate objectives. The Committee, therefore, retains discretion to award compensation that is not fully tax deductible.

Examples of compensation provided to Covered Executives that are not subject to the Code Section 162(m) deduction limitation include Final Awards under Performance Stock Rights and stock options awarded in 2006 under the 1998 Plan. Additionally, cash compensation paid to Covered Executives under the AICP for 2006 is not subject to the deduction limit. In contrast, Restricted Stock Equivalents and restricted stock awards awarded to Covered Executives under the 1998 Plan are subject to the deduction limit. Thus, the RSEs awarded to Covered Executives in 2007 for 2006 performance are subject to the deduction limit. Additionally, the cash settlement payments made under the Special 2006-2008 Senior Executive Retention Incentive Arrangement to certain Covered Executives are subject to the deduction limit. (See “Long-Term Compensation — C. Special 2006-2008 Senior Executive Retention Arrangement” on pp. 36-37.) Further, certain cash payments made to Covered Executives for hiring or retention purposes are subject to the deduction limit. Finally, since the salaries of certain Covered Executives exceed $1 million (see Summary Compensation Table on p. 45), we cannot deduct the portion of their salaries in excess of $1 million and the cost to us of their perquisites.

B. Internal Revenue Code § 409A

Code Section 409A provides that amounts deferred under nonqualified deferred compensation plans are includible in an employee’s income when vested, unless certain requirements are met. If these requirements are not met, employees are also subject to an additional income tax and interest. All of our supplemental retirement plans, severance arrangements, and other nonqualified deferred compensation plans presently meet, or will be amended to meet, these requirements. As a result, employees will be taxed when the deferred compensation is actually paid to them. We will be entitled to a tax deduction at that time.

C. Internal Revenue Code § 280G

Code Section 280G disallows a company’s tax deduction for “excess parachute payments.” Additionally, Code Section 4999 imposes a 20% excise tax on any person who receives excess parachute payments. Presently, only Mr. Mulally is entitled to payments upon termination of his employment following a change in control of the Company, which may qualify as “excess parachute payments.” Accordingly, our tax deduction for any such excess parachute payments would be disallowed under Code Section 280G. Not all of the payments to which Mr. Mulally may become entitled would be excess parachute payments. None of the other Named Executives is entitled to such payments.

D. Accounting Treatment

We account for stock-based awards based on their grant date fair value, as determined under FAS 123R. The compensation cost of these awards is recognized over the award vesting period. If the award is subject to a performance condition, however, the cost will vary based on our estimate of the number of shares (or equivalents or rights) that will ultimately vest. For additional information, see footnote 3 to the Summary Compensation Table on p. 46.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based on this review and discussion, the Committee recommended to the Board of Directors that the CD&A be included in this proxy statement.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is comprised of Richard A. Manoogian, Ellen R. Marram, and John L. Thornton, none of whom is an employee or a current or former officer of the Company. John R. H. Bond and Robert E. Rubin served as members of the Compensation Committee during part of 2006. Mr. Bond was Group Chairman of HSBC Holdings plc, and Mr. Rubin is Chairman of the Executive Committee and member of the Office of the Chairman of Citigroup Inc. Both HSBC Holdings plc, and Citigroup Inc., or their affiliates, provided investment banking services to the Company in 2006 during the time that Messrs. Bond and Rubin served on the Committee.

Compensation of Executive Officers

The table below shows the before-tax compensation for 2006 for William Clay Ford, Jr., our Executive Chairman who served as CEO from January 1, 2006 until September 1, 2006, Alan Mulally, who served as President and CEO from September 1, 2006 for the remainder of the year, Donat R. Leclair, who served as Executive Vice President and Chief Financial Officer, the three most highly compensated executive officers at the end of 2006, and James J. Padilla, who would have been among the three most highly compensated executive officers at the end of 2006 but for his retirement during the year.

SUMMARY COMPENSATION TABLE

Notes

⁽¹⁾Mr. Ford did not receive a salary for his services as CEO and Executive Chairman for 2006 pursuant to his May 2005 compensation arrangement (see “Compensation Discussion and Analysis — Executive Chairman Compensation” p. 42).

⁽²⁾Mr. Mulally’s bonus relates to his hiring as President and CEO and includes $11 million to offset forfeited awards at his prior employer (see “Compensation Discussion and Analysis — President and CEO Compensation” pp. 42-43).

⁽³⁾The amounts shown in columns (e) and (f) reflect the dollar amounts of compensation cost for equity-based compensation recognized for each of the Named Executives for financial statement reporting purposes for the year ended December 31, 2006 in accordance with FAS 123R. Because some of the equity awards have vesting conditions, their costs are recognized over multiple years. Consequently, the amounts shown reflect the 2006 FAS 123R cost of such awards made during 2006 and prior years. For Mr. Mulally, the amount includes the FAS 123R cost recognized in 2006 for a $5 million stock option grant that he received in March 2007 as part of his 2007 option grant, as required under his accession arrangement (see “Compensation Discussion and Analysis — President and CEO Compensation” pp. 42-43). The assumptions used for the calculations can be found at footnote 16 to our audited financial statements in Ford’s Annual Report on Form 10-K for the year ended December 31, 2006. Pursuant to SEC rules, we disregarded the estimate of forfeitures related to service-based vesting conditions. For Named Executives who were retirement eligible at the time of the awards (Messrs. Leclair and Padilla), the total grant date fair values of awards are recognized in our financial statements in the year of the grant. Mr. Mulally received his 2006 stock awards and option awards on September 1, 2006, while the other Named Executives received their stock awards and option awards in March 2006. These amounts reflect the Company’s accounting for these awards and do not correspond to the actual value that may be recognized by the Named Executives.

⁽⁴⁾The amounts shown in column (g) reflect awards earned by certain Named Executives under the Annual Incentive Compensation Plan (“AICP”) and the cash settlement of the 2006-2008 Senior Executive Retention Incentive Arrangement (“SERIA Settlement”) (see “Compensation Discussion and Analysis — Annual Compensation — Incentive Bonuses” pp. 31-32 and “Compensation Discussion and Analysis — Long-Term Compensation — C. Special 2006-2008 Senior Executive Retention Incentive Arrangement” pp. 36-37). For the Named Executives who received such awards, the amounts shown consist of the following:

⁽⁵⁾The amounts shown reflect the increase in the actuarial present value of accrued pension benefits under various Company plans measured from December 31, 2005 to December 31, 2006 (or for separated employees, to the date of their employment separation). See the Pension Benefits in 2006 Table on p. 57 for additional information, including the present value assumptions used in these calculations. For Mr. Padilla, the actuarial present value of his accrued pension under various plans decreased by $458,420 for 2006. No Named Executive received preferential or above-market earnings on deferred compensation.

⁽⁶⁾The following table summarizes the amounts shown in Column (i).

All Other Compensation in 2006

⁽ⁱ⁾For a description of perquisites relating to personal use of company aircraft, our evaluation vehicle program, and security and other services for Named Executives, see “Compensation Discussion and Analysis — Perquisites and Other Benefits” on pp. 40-41. Other perquisites and personal benefits whose incremental cost is included in the amounts shown (unless indicated) consist of the following: personal use of Company phone cards and cell phones, personal use of car and driver service, personal use of Company season tickets to athletic events,* personal use of Company club memberships,* annual executive health exams, and relocation expenses.

* Indicates no incremental cost to the Company because these benefits are primarily for business use and when the executive uses such benefit for personal use, the executive pays for any costs other than season ticket and/or annual club membership costs.

Amounts for Messrs. Ford, Mulally, Fields, Booth, and Padilla include the incremental costs to the Company for providing certain perquisites and other benefits during 2006. For Mr. Ford the amount shown includes $185,232 for personal use of Company aircraft and $85,708 for security. For Mr. Mulally the amount shown includes $172,974 for personal use of Company aircraft and $55,469 for relocation costs and temporary housing. For Mr. Fields the amount shown includes $517,560 for personal use of Company aircraft. For Mr. Padilla the amount shown includes $82,265 for personal use of Company aircraft and $27,096 for use of the Company’s car and driver service. For Mr. Booth, the amount shown includes $177,793 for costs associated with his international service assignment, including: home leave travel; temporary housing; lodging and meals during relocation; and housing allowance. For 2006 and prior years, we valued the incremental cost of the personal use of our aircraft using a method that takes into account: (i) the variable cost per flight hour, including flight crew travel expenses; (ii) landing/parking/hangar storage expenses; and (iii) any customs, foreign permit and similar fees. We calculate the aggregate incremental cost of providing security to Named Executives as the actual cost incurred to provide the security. We calculate the aggregate incremental cost of relocation and temporary housing expenses as the actual cost incurred to provide these benefits. We calculate the aggregate incremental cost of personal use of the Company’s car and driver service as the overtime pay of Company staff in providing the service.

⁽ⁱⁱ⁾Amounts shown reflect the dollar value of premiums provided by the Company for employees to purchase life insurance. In general, the Company provides employees with enough “flex dollars” under its flexible benefits menu to purchase life insurance equal in amount to 1¹/2 times an employee’s salary. An employee must purchase life insurance in an amount at least equal to ¹/2 their salary with Company provided “flex dollars.” Employees may purchase additional life insurance and these premiums are payroll deducted with no additional Company contributions or cost.

⁽ⁱⁱⁱ⁾The amount shown for Mr. Mulally reflects the contributions made to his Ford Retirement Plan account (see “Compensation Discussion and Analysis — Retirement Plans” on pp. 39-40).

^(iv)The amount shown for Mr. Padilla reflects payments made pursuant to a consulting agreement (see “Potential Payments Upon Termination or Change in Control — James J. Padilla” on pp. 67-68).

^(v)The amount shown for Mr. Mulally relates to Company contributions to a nonqualified benefit equalization plan related to the Ford Retirement Plan (see Nonqualified Deferred Compensation in 2006 Table and footnotes 1 and 2 on pp. 59-60). The amount shown for Mr. Booth relates to various payments related to his international service assignment, such as cost-of-living adjustments, language instructions and other payments associated with his international service. These benefits are generally available to any level of employee who is on an international assignment.

Grants of Plan-Based Awards in 2006