QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK OVERVIEW We are exposed to a variety of market and other risks, including the effects of changes in foreign currency exchange rates,  commodity prices, interest rates, as well as risks to availability of funding sources, hazard events, and specific asset risks.  These risks affect our Automotive and Financial Services sectors differently. We monitor and manage these exposures as an  integral part of our overall risk management program, which includes regular reports to a central management committee,  the Global Risk Management Committee (“GRMC”). The GRMC is chaired by our Chief Financial Officer, and its members  include our Treasurer, our Controller, and other members of senior management.  Our Automotive and Financial Services sectors are exposed to liquidity risk, or the possibility of having to curtail their  businesses or being unable to meet present and future financial obligations as they come due because funding sources may  be reduced or become unavailable. We, and particularly Ford Credit, which comprises substantially all of our Financial  Services sector, maintain plans for sources of funding to ensure liquidity through a variety of economic or business cycles. As  discussed in greater detail in the Management’s Discussion and Analysis of Financial Condition and Results of Operations,  our funding sources include commercial paper, term debt, sales of receivables through securitization transactions, committed  lines of credit from major banks, and other sources. We are exposed to a variety of insurable risks, such as loss or damage to property, liability claims, and employee injury. We  protect against these risks through a combination of self-insurance and the purchase of commercial insurance designed to  protect against events that could generate significant losses. Direct responsibility for the execution of our market risk management strategies resides with our Treasurer’s Office and is  governed by written polices and procedures. Separation of duties is maintained between the development and authorization  of derivative trades, the transaction of derivatives, and the settlement of cash flows. Regular audits are conducted to ensure  that appropriate controls are in place and that they remain effective. In addition, our market risk exposures and our use of  derivatives to manage these exposures are reviewed by the GRMC, and the Audit and Finance Committees of our Board of Directors.  In accordance with corporate risk management policies, we use derivative instruments, such as forward contracts, swaps and  options that economically hedge certain exposures (foreign currency, commodity, and interest rates). Derivative positions are  used to manage underlying exposures; we do not use derivative contracts for speculative purposes. In certain instances, we  forgo hedge accounting, which results in unrealized gains and losses that are recognized currently in net income; examples  of economic hedges that do not qualify for hedge accounting include foreign currency hedges of inter-company loans and  dividends and certain transactions that use multiple hedge instruments. For additional information on our derivatives, see  Note 19 of the Notes to the Financial Statements. The market and counterparty risks of our Automotive sector and Ford Credit are discussed and quantified below.  Our Automotive sector frequently has expenditures and receipts denominated in foreign currencies, including the following:  purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and  investments in foreign operations. These expenditures and receipts create exposures to changes in exchange rates. We also  are exposed to changes in prices of commodities used in our Automotive sector and changes in interest rates. AUTOMOTIVE MARKET AND COUNTERPARTY RISK Foreign currency risk and commodity risk are measured and quantified using a model to calculate the changes in the value of  currency and commodity derivative instruments along with the underlying cash flow exposures being hedged. Our earnings at  risk (“EaR”) methodology is based on transaction exposure, which is the exposure that results from specific transactions and  our related hedging activity. The methodology does not attempt to assess the impact on financial statement earnings resulting  from non-cash flow risks (e.g., re-measurement of foreign currency-denominated assets or liabilities through income). EaR at  a 95% confidence level is the methodology used to calculate the potential impact to pre-tax earnings related to cash flows in  foreign currency and commodity price exposure. The EaR model is used as an estimation of risk and a management tool, but  will not necessarily represent actual changes in earnings based on the combination of hedging and underlying exposures.  The calculation of EaR combines current market data with historical data on volatilities and correlations of the underlying  currencies or commodity prices. This creates hypothetical prices based on the calculation of historical volatilities; therefore, the  EaR model may not accurately predict future market risk. The EaR methodology includes our hedging actions as well as the  underlying exposures over a twelve-month period.  5 0