LEWIS BOOTH: If I’m your definition of a rock star, you guys need to get a life. Okay. I’m delighted to be here, and I was just sitting on the plane last night rehearsing the presentation. I thought, I’m really glad it’s this year we’re doing it rather than two years ago when I became CFO, because two years ago it was just after Lehman Brothers had gone bankrupt, and we were really beginning to wonder what the rest of the world was going to look like.
So I’m going to try and take you through the turbulent times we’ve been navigating, actually for about the last five years for Ford. Because we had our own turbulence before the world economy fell apart. I’ve simplified, I’m going to talk about the automotive company only. I’m not going to talk about how we kept Ford Credit Finance, because frankly that’s also been a pretty interesting tightrope walk, but I couldn’t cover all of that. I’m not going to cover selling Jaguar Land Rover to Toyota and selling Volvo to Geely, because again that’s another story.
So you know I’m just going to talk about Ford, and I’m going to present on behalf of not just the team I have working for me now, but also the team that was in place right after the start of the journey, including my predecessor, Don Leclair.
If you can’t sit in the back, there’s plenty of room up at the front, so there’s no problem making space.
If you see how our turbulent times started, we were in a period in 2006 where the auto industry in the U.S. was running at about 16 or 17 million units, a pretty healthy industry size. Ford was actually going through cash fairly comprehensively at that stage, but things began to feel a bit weaker in 2007 as the economy began to feel that there were signs that all wasn’t well. And then we saw rapid rises in oil and commodity prices at the end of 2007.
Get to 2008, the financial crisis is beginning to start. Lehman files in September, and then, you know, the slide says credit markets tighten. Well, actually credit markets closed for quite some time. And then in about March the S&P bottomed, and according to the Economist, the economic recovery started in the second quarter of 2009. All I can tell you is that it certainly didn’t feel like it in the second quarter of 2009, and for our industry we certainly weren’t in a recovery stage at that.
So we had lots and lots of turbulence beginning to develop. As you can see, oil and commodity prices started to rise. Gas started going up to $4 a gallon in the U.S. We saw the industry sales dropping, and for Ford even worse than that, we saw vehicle mix shifts moving away from trucks and into small cars. It played to the import brand strength and it played to the domestic brands’ weaknesses. And you can see we dropped down from 16 or 17 million units down to a low of 9 1/2 million units. That spike in the late summer of 2009 was Cash for Clunkers, but the recovery really from the trough was very slow apart for the Cash for Clunkers period.
So having just given you the backdrop, let me just tell you what we were doing about it. By the end of 2006, early 2007, we had a plan, and the plan as you’ll see was aggressively restructuring to operate profitably at current demand and changing global mix. We had no idea that the current demand was going to drop as far as it was, but the discipline we put in place is, we were going to stop shipping cars to dealers that customers didn’t want to buy. We were going to stop building cars that nobody wanted, and that was a real significant step forward for Ford.
The second thing we committed to—even in the depths of the tough times—we were going to continue to accelerate the development of new cars that customers want and value. If you’ve been around this business for any length of time, you know that recessions ultimately stop. Sometimes you don’t know when it’s going to stop, but we knew that when the recession started improving, we had to have greater revenue products, because in past recessions we stopped our product spending to cut back on capex, and improve our cash flow when you come out of the recession, and then all the guys around the world who haven’t stopped spending on product took market share from you.
I’m going to spend quite a lot of time on financing our plan and improving our balance sheet. And then I think probably the new Ford of working together effectively as one team leveraging our global assets, and I’ll talk about that a little bit. I’ll cover all elements, but I really want to spend some time on financing our plan, and improving our balance sheet.
And I just want to make the point here: if you go into a recession, and you don’t have a plan that is fundamentally going to change your business model so that you can operate and make money at lower levels of demand, then getting more liquidity is an interesting exercise, but all it does is slow the decline. You’re still going to go out of business if you really don’t have a plan that commits you to change the whole way you do business, and I think people think of liquidity as the only answer. You’ve got to have liquidity, but you’ve got to have a plan that’s going to improve your business.
So we changed the management at Ford North America at end of 2005, we developed a plan in early 2006 to improve the North American business, because the North American business in 2006 was our principal issue. We were burning a lot of cash. We went through $5.6 billion of operating cash in 2006. We accelerated the restructuring in the middle of the year as we started to see our market share begin to decline. And then Alan Mullaly arrived in September of the year, and in December we raised what we call the largest home improvement loan in the world, because we knew we had a lot of restructuring ahead of us.
So we went out in December and raised $23.5 billion of liquidity: $11.5 billion of a five- year secured revolver; $7 billion of a seven-year secured loan; and then $5 billion of senior convertible debt. We mortgaged everything, you know, right down to the Ford Oval, to our banks, and we had frankly a fantastic response from our banking partners to provide us with these loans. They bought into the plan; we took them through the plan. They bought into the recovery actions we were taking, and they provided us with all this financing to ensure that we could get through these really tough times.
I think the last lesson of this is we did it just at the right time. We all know you have to have liquidity, but frankly if you don’t have it before you need it, when you really need it, it’s typically not there. If we tried to get liquidity during 2008, for example, it wouldn’t have been there, and I think at least one of our competitors discovered that.
So in 2007, we were back implementing the plan, and then actually thinking about risk, and particularly thinking about derisking our pension plan.
We sort of formalized and crystallized the One Ford Plan. You can see in the middle of the left-hand box, I don’t know if you can see it back there, but in the middle of the left-hand box, you see the four steps of our plan. I think also importantly, we actually identified the behaviors that we wanted people to operate. I think many of you know the history of Ford is a somewhat balkanized business, with Ford of Europe operating differently to Ford of North America, differently from South America and Asia-Pacific. We no longer had that luxury. We knew that if we were going to continue developing products for around the world, the only way we could afford to do it was to make sure around the world one product fit, rather then reengineering products for individual market places.
It helped tremendously that customer tastes were beginning to align and, for example, small cars were beginning to be much more important in North America, and fuel economy was beginning to be much more important in North America. So having crystallized the Ford plan and been implementing it during 2007, we then went on to think about our pension plans.
We did two, I think, smart things at the time, and I am really glad that Don [Leclair] and Neil [Schloss] in the treasurer’s office, and Kathleen Gallagher, who you’ll hear talking about this issue later on today, took this step to change the focus of our asset management to reduce risks of funding shortfalls instead of maximizing returns. As we were beginning to get very worried about our liquidity, we didn’t want to have sudden unexpected needs for cash contributions to our pension plan, so we took steps to lower the equity and interest-rate risks. You can see that we moved our asset allocation from 70% equity to only 30% public equity, 45% in fixed income, and also started building our investments in alternatives. We also launched a derivative overlay strategy to hedge the interest-rate risk.
And then into 2008, we thought the plan was beginning to work. We made money in the first quarter, and then after the first quarter things began to go pretty sour as the industry starts falling down. As you can imagine, we’re a capital-intensive business with very, very high fixed costs. If you take the industry down by as much as 50%, we start burning a huge amount of cash, not just because of our high breakeven, but also our payables were running off very fast as we stopped buying parts from our suppliers.
So this is why we were beginning to feel slightly better in the first quarter. We’d sort of muddled our way through 2007 at just about breakeven, and we were profitable in the first quarter. And then this is what happened to our cash flow in 2008. A $1.6 billion cash outflow—this is on an operating basis—A $1.6 billion cash outflow in the first quarter, $3.1 billion in the second quarter and $7.7 billion cash outflow in the third quarter.
Actually the first thing I did when I became CFO of the company was announce the third-quarter earnings, with a $7.7 billion outflow. I knew this was a bit scary. I knew how much liquidity we had at the end of the third quarter, we had $30 billion of liquidity, and I could multiply out 7-1/2 times whatever number it was to get to 30. And I thought perhaps the third quarter was going to be the absolute worst of our cash outflow. It just about was, but frankly the fourth quarter was pretty scary too, at $7.2 billion.
If I turn to the next slide, you can see that our liquidity by the end of 2006, with the home improvement loan, we’d got up to $46 billion. Our liquidity had now run down to $23.5 billion at the end of the year. You can see the little callout box. We’d already lost some of our revolver capacity, our revolving credit line capacity, because when Lehman Brothers went bankrupt, the capacity went with it, and until the bankruptcy was sorted out, we couldn’t get our securities away from Lehman. So we couldn’t use the securities to go and find more liquidity. This was a very difficult situation. We really didn’t know at the end of the fourth quarter of 2008 that our cash burn had really stopped dropping and was about at the bottom.
So at the same time this is happening, we got this tragedy of GM and Chrysler having to be bailed out by the outgoing administration to keep them alive through the first quarter of 2009. We had made the decision, we did ask the government for a revolving credit line when we testified in Washington in December, and the reason we asked for a revolving credit line was we had no idea if the failure of GM and the failure of Chrysler was going to be controlled or uncontrolled. We were really concerned if it was uncontrolled that it would have a major impact on our suppliers, and that we would have a substantially larger cash burn than we were anticipating.
Unfortunately that revolving credit line never materialized, but as the business improved we pretty rapidly decided we didn’t need to continue pursuing the government to ask for that.
We didn’t need the funds for day-to-day expenditures. We determined that we thought during 2009, we could manage our internal cash flow to insure that we did not dip into our minimum operating cash levels, but we were also concerned that if we waited any longer, with the fragility of the banking system, that we may lose more capacity if we had another bank go under. So this was a big decision to draw down the revolver, and we did that in January, and got the cash into our accounts early in February.
We also knew because of what was going on at GM and Chrysler that there were clearly going to be some major changes and competitiveness in labor contracts. And rather than wait for GM and Chrysler to negotiate with the UAW while they were in bankruptcy, we decided we would go out to the UAW and say, we need to be more competitive if we’re going to survive without going into Chapter 11. We’d already made a major step forward in competitiveness in the November ’07-September ’07 negotiations, and in March we agreed to further changes that resulted in cost savings of about half a million dollars a year on a running basis.
We also managed to work with the UAW, who were very, very constructive, in terms of splitting our VEBA note, the VEBA trust we put all our retiree healthcare into. Splitting the note into two parts, the second part of which we had the option to pay either in cash or in stock. And that gave us some comfort that over the next five or six years as the payments came due on half of the VEBA note, if we didn’t have the cash available, we could pay in stock. So that was a further help to our liquidity. That was done in March.
And also in March, we decided that we really ought to try and reduce our debt somewhat, because we were very concerned that as we emerged out of the troubled times, that our debt burden on the balance sheet was going to be too great. I’d say of all the things we did in this period, this felt like the most difficult thing to do. It was perfectly timed, because we bought this debt back at, you know, on average 40 cents on the dollar. But at the time we did it, we’re down to $23 billion of liquidity.
I went to the operating team, and said, ‘I want to use another $2 billion to buy back debt,’ which was going to reduce our cushion to safety. The only way I think we managed to convince ourselves it was the right thing to do was as a group, we took the balance sheet issues away from just being a finance and treasury and CEO problem. We sort of educated the whole operating committee on what does our balance sheet look like, and we cannot continue to fund our liquidity through increased debt. And the whole operating team committed that if we needed this couple of billion dollars to buy back debt, they would help us by imposing further structural reductions in their own businesses to generate the additional cash.
Again at the time it was going on, I remember one weekend where I think I’d got authorization for like $2.1 or $2.2 billion of cash, and some of the opportunities came in that meant we needed to spend $2.5 billion. I remember spending a weekend worrying about spending the extra $250 or $300 million of cash. We felt, you know, that close to our margin of looking after the business.
And the first choice was we could start raising some equity, and in May—and in an extraordinary piece of timing, this was the month after Chrysler had gone into Chapter 11, and the month before General Motors went into Chapter 11, we went to market and raised equity for a domestic auto company. And I think that really was for us the turning point in terms of the investors beginning to believe in the Ford story, because they were prepared to put their money where our mouths were at that stage.
And in August we turned on an equity dribble-out program that we’d had approved and announced some time ago, and raised another $600 million. And then in November, we issued another convertible note for $2.9 billion, and at that stage the stock was now up to about, I think about $7.
And then during this same period, we were in negotiations with the Department of Energy. There was an obscure, but the legislation I think is Section 136 of the Energy Security and Independence Act, which offered loans against expenditures to companies that were going to improve fuel efficient technology for vehicles. We had about $14 billion of spending in the 2009 through 2012 period that was potentially eligible. And after a huge amount of discussion with the Department of Energy about the terms and conditions of these loans, particularly because of the contractual obligations we had on our previous securitized debt, they approved us for $5.9 billion worth of loans. And you draw it down after you’ve spent it, so by the end of the third quarter, we’ve drawn down $2.3 billion of loans. And this is relatively low-cost, long-term debt, so it’s been very helpful to again to look after our liquidity. Mike Seneski from our team will take you through this a little later today.
And then toward the end of 2009, we were beginning to worry that the revolving credit facility would come due in December 2011. We wanted to push that out a little bit longer to give us more time to improve the business, and we went out and offered our banking partners a 25% reduction in exposure in return for an extension through to December 2013. As a result of that, we paid back $1.9 billion. We actually converted $700 million of the revolving credit line into a new term loan. And I’d have to say right through this period our advisers and all the banks were tremendously constructive in helping us stay funded and liquid.
This is a depressing slide, because despite all that work in 2009, we finished the year in 2008 with $23.3 billion of debt. We finished the year at the end of 2009 with $33.6 billion of debt. The really big chunk—you can see that the revolver draw was offset by the debt buyback—a happy coincidence of the same number. You see the DOE loans and the convertible debt, and the restructure and the revolver. But we took our VEBA notes, the remaining notes to the VEBA trust, off the balance sheet where they were in OPEB obligations, in as debt, and that raised our debt levels a further $7 billion.
And by the way we don’t—I get asked this question so I’ll answer it before I get asked it again—we don’t think of our debt burden as a disadvantage compared to GM or Chrysler. I think none of us, including GM and Chrysler, none of us think Chapter 11 is a good business strategy. We went through this very tough period under our own steam, and in return for not being able to get rid of debt, we have an intact management team, we have an intact business plan, we have intact product investments, we have intact relationships with our dealers, our suppliers, our employees, our retirees, all the stakeholders. And I think as you can see in our business results, we’ve also been able to use this as an opportunity to encourage people to go into the Ford showrooms and look at Ford vehicles.
I don’t think customers buy Ford cars or Ford trucks because we didn’t take the money. But I think what it has done is given us the opportunity to encourage customers who perhaps have not been going into Ford showrooms, particularly not going into Ford showrooms to look at cars. As our car portfolio strengthened, customers were prepared to go into Ford showrooms because we didn’t take the money. I think they’re now buying the cars because of the strength of the product portfolio.
So debt paid down this year: We’ve gone so far from $33.6 billion to $26.4 billion at the end of the third quarter, the results were announced on Tuesday. We also announced on Tuesday that we’re actually going to pay off the remaining piece of the VEBA note in cash, not in stock. And that will take our debt reduction on a pro forma basis by the end of October, we will actually pay the $3.6 billion on Oct. 29, that will take our debt down to $22.8 billion.
So a $10.8 billion reduction in 10 months, and that will save us on an annualized basis about $800 million a year. To put that in context, $800 million a year is a pretty good car program. So if we can stop paying that to the banks, we can start investing in product, and generate more money, and work with the banks that way. We have our banking partners here, so I have to be very careful what I say, but thank you for your support.
And we’ve also announced another exchange offer on the remaining convertibles, both the stuff we issued in 2006 and the stuff we issued last year. Timing is everything. When we bought our convertible back in March last year it was about, I think the convertible piece itself was about 49 cents on the dollar. Our convertible notes now are trading well in excess of par, so you know, it’s an example of timing, and it does make a difference in the cost of things.
So that’s our turbulent times. You can see the stock price at the end of 2005 was $8.58. You can see in November 2008, it got down to into day trading at $1, I can’t tell you how demoralizing that was to work for a company that had a stock at a value of a dollar and a penny, and it closed yesterday at $14.23. And the other message of this is, we’ve been watching our liquidity, and at times our liquidity has given us chances to do things where the timing opportunity opened up, we had enough liquidity to do it.
Let me just talk a little bit about the rest of the business plan. We’ll talk about our aggressively restructuring. We’ve taken out $15 billion dollars of cost in the last five years, structural cost. When we’ve completed our final plant closures, we’ll have taken out between 40% and 50% of our North American salary out of head count. That’s a traumatic thing to have to do. I think that will always, always teach us to keep our costs under control, because laying people off at that rate is an awful thing to have to do.
And you can see our profitability has been improving. We turned the corner in the third quarter of 2009, and we’re now, you know, we’ve had a decent year this year. We would never have imagined frankly that we could make $7 billion year-to-date in an industry that’s going to close at 11.5 or 11.6 million units, 40% down on historical levels. And that, I think, indicates that we took advantage of the crisis to permanently restructure our business.
I actually tend to forget our profit numbers; I don’t forget our cash numbers. Well, this is, I think, a lesson for all of us that, you know, you never go bankrupt because of your profit-and-loss statement. You go bankrupt because you can’t pay your suppliers, or you can’t pay your employees, and it’s easy to forget that in a large company. In a large company, liquidity has always been available to people. There hasn’t been a particularly great capital allocation process. We’ve spent a huge amount of time educating the operators on what drives cash flow and how they can improve it. And that it is not just a treasury function; actually cash flow is driven by the operations. If you leave a bunch of cars unsold at the end of the quarter, that’s negative cash flow. All our operators understand the physicals behind our cash flow now, and I think that’s another important lesson of this crisis. And within this, we’ve done a huge amount on working capital and Mike Seneski will take you through a presentation on our working capital actions also later on today.
So we carried on spending money on products, and this is just an example of the number of new products we’ve been able to launch around the world in these troubled times. And I think that more than anything is the reason you see market share growth from Ford in North America. And we’re doing it much more efficiently as a result of One Ford. In the past, we used to develop cars that looked pretty similar, but shared very little in the way of parts.
So the South American Fiesta and the Europe and Asia-Pacific Fiesta looked almost identical, but for localization reasons and local material reasons, they only shared one part. When we launched the new Fiesta, we have 65% parts commonality around the world. This one was a little bit late to One Ford, the North American market wasn’t originally included in the program, so the parts commonality is a little lower than we expected. But the next slide shows the new Focus that we’re launching at the end of this year, simultaneously in North American and Europe, that will have 80% parts commonality.
The reason there’s still a 20% parts lack of commonality is because customers still have different tastes. For example, in Europe there’s about a 55% or 60% mix of diesel engines in this size car. Diesel engines are completely irrelevant in the U.S., so you have to have sort of the lack of commonality that is driven by customer requirements. What we’re really working hard to push out of the system is the lack of commonality because engineers like designing new parts. We’re really trying to stop that happening, and make the changes that the customers recognize, not that our engineers recognize.
And we’re also going for scale, because these are two new products on the same platform as the new Focus. So by the time we finish rolling out the Focus platform, and by platform I mean engine compartment, power train, floor plan and suspension systems, we’ll have 10 different top hats that you see on that platform, and we’ll be building two million units a year around the world.
That gives you a fantastic leverage in sharing engineering costs around the world, sharing engineering costs with our suppliers, and managing to leverage our global suppliers around the world. So this is really a manifestation of One Ford in physical vehicle terms.
It’s probably a deck of 300 or 400 slides that we go through, but they’re completely consistent in a common format, and we show changes in a separate color, so we only spend time on changes. And the purpose of the review is to identify where we have problems. It’s not a congratulatory process; we’re not interested in where things are going well, although we will celebrate success, but the intent is to have complete transparency of the way we operate.
So where there are business issues, the expectation is that whoever is struggling with that business issue will identify it as a red item, and then collectively we will find a solution to it. And I think the really important thing for this group is we concluded very early on, straight after I arrived, that the treasury team had to be part of this meeting, because it made no sense for the treasury team to be operating in isolation without understanding what the business was driving.
And then we’re moving out of the survival mode. We started in mid-2009 thinking we really need to start participating around the world more actively than we have been doing, while we have been concentrating on survival, particularly in North America. You can see from 2000 to 2009, the world changed. While we were focused on North America and restructuring Europe, the world changed, and Asia-Pacific went from 23% of the total industry to 39% of the total industry. And by Global Insight’s forecast, it will be at 44% of the total industry by 2019.
And you can see the two standouts and they’re obviously China—hard to believe that the Chinese market was only 2 million units in 2000, 14 million units last year, probably 18 million units this year, and Global Insight I think says it’s going to be at 28 million units in 2019. The China government forecast is 32 million units, and I think I’d put my money on the China government actually. And the same with India, India is just also accelerating from a lower base. We are underrepresented in these markets. If we have a total market share around the world of about 7.5%, it’s way down, only about 2.5%, in Asia-Pacific. So we are really working very, very hard on accelerating our growth plans.
Let me just wrap up. What have we learned about treasury and risk management? First of all, I think everybody knows liquidity is golden. Just always assume that when you really, really need liquidity, it’s not going to be there. If you haven’t got it set up when you need it, it’s not going to be there.
Secondly, transparency of data is key. I talked about the treasury team being part of our weekly meetings. We’ve, for example, we use the same slides in the Ford board meetings that we use for our operating team meetings, exactly the same slides, which is wonderful from an efficiency point of view, because you know I can only remember one set of slides. So the slides that I take to the Thursday meeting, I then take to the senior company meetings, and then I take them to the board. And actually the slides are essentially the same slides that drive the earnings release that we do every quarter.
When we went to the markets to buy back our debt, we did pick—actually there’s an element of luck here—but we did pick when the debt was almost as cheap as it got. And when we went to the board, it was a very short discussion, because we’d taken them through the rationale of what we wanted to and the explanations several times before they actually had to make a decision about it.
I’ve talked about treasury being in all the operating decisions; timing is vital; good advisers; we have great advisers, and we have to be as transparent with our advisers as we are with our own management, because if our advisers don’t understand what we’re trying to achieve, they can’t do their job, and we’re working hard on that. And finally, operating cash flow control is a vital skill. It’s not just a finance skill, because it’s really about making sure the operators understand the physicals that drive cash flow, and then once they understand the physicals, they can manage the physicals, and frankly all we have to do then is add up the numbers.
Okay, so back to where I started. So this is the plan. I’ve worked for Ford for 32 or 33 years, this plan has been unchanged for four years, that’s a record. I don’t think it’s going to change for the foreseeable future, because it’s working. And let me just close by saying this is our ambition: Profitable growth for all. Thank you very much.
Okay. I was asked to—I’d be delighted if anybody has any questions, to try and answer them. Oh, I’m stunned.
Q Are you enjoying yourself?
BOOTH: Yeah, you know I was running operations. I had trained as an engineer, I had 20 years in finance, and I had maybe 15 years in operations. My dad was a car dealer, and my twin brother is a car dealer. This stuff’s in the blood, and actually I like, you know, stroking cars, and all the going through the plants, and taking costs out of stuff.
This is such a fantastic story. I mean we wrote this out last week, and it was like a thriller. They’re galloping towards the cliff, and they’re going to go over, no, no, you know, all that. And it’s really been like that, and what you’re actually seeing is Ford operating, I think, absolutely cohesively and coherently as a team, and all our problems are shared.
I lie awake at night worrying about the balance sheet, but I know Mark Fields, who runs the Americas, also lies awake worrying about the balance sheet, because he now understands what it means to the company. So yeah, this is a fantastic time, and you know there are the days where you think I’d probably prefer a proper job, but most of the time I think I’ve got the best job in the company. Thank you.
Q Good morning, a quick question about Cash for Clunkers, we’ve heard a lot about it over here. Was that good for Ford, or did it just cannibalize future growth or future sales?
BOOTH: No, we think it was net good. We saw, we think, some genuinely incremental sales. The month after it didn’t feel quite so good, because I think Cash for Clunkers finished in August, and September was a disaster. But that was the pull ahead of the non-incremental sales, and people who were, as you say, just cannibalizing next month’s sales. But we think, we believe that maybe 40% or 50% of the spike was genuinely incremental business, and stayed there.
Q You talked about ways to increase access to cash through external sources of liquidity. Did you also have significant initiatives internally to kind of reap the rewards of streamlining your processes to get at internal sources of liquidity?
BOOTH: Yes, actually we’re going to have a presentation from Mike Seneski later on today, but that’s what I meant a little bit by the physicals of cash flow. We’ve worked really hard on working capital. Every operator looks at their work in progress, for example, they look at their finished vehicle stocks, they look at, particularly at year end they’re looking very carefully to make sure we’re not leaving a bunch of cars sort of laying around the plant for the two-week shutdown.
So yeah, I’d say that it was an area that we weren’t very good at. I think also three or four years ago, people thought of inventory targets as things to meet at quarter end, and people now recognize that inventory targets are things you want to meet the whole quarter. And we’ve been gradually reducing the minimum operating cash to run the business. It’s a big business, and you need a big chunk of cash as your minimum liquidity, but we’ve been working that down over the last three years.
BOOTH: I’m going to ask Kathleen Gallagher, who will be here this afternoon, who was one of the architects of the plan, to talk about that in more detail, but we’ve seen benefits from alternatives. We’ve been a bit slower to get into them than I think we originally envisioned. The allocation I showed you as our target, we’re not there yet, but it has reduced the volatility of our asset base. But Kathleen will be delighted to answer all your questions, and she is our director of asset management, and she is just a magic guardian of our—I mean this is a huge responsibility, because we’re acting as guardian for other people’s benefits, and we’re very pleased to have her. So she’ll talk about that this afternoon.
We’re done? Okay. Thank you very much for your time today.