Tuesday, April 7, 2009

Ford Keeps Chugging Along

As the American auto industry drives itself over the cliff with Barack Obama at the wheel, the Ford Motor Company continues to distinguish itself for its--dare I say--self-reliance. I'm surprised they haven't found a way to tap into the problems of their competitors yet by advertising themselves as the company that will be here when the sun rises tomorrow....

In what will probably go down as one of the great corporate decisions in history, Ford arranged billions of financing in 2006/7 that they are now using to guide them through this storm. They haven't taken any bailout money from Uncle Sam yet and they just might make it through this thing without taking a penny. One can only hope the market rewards them


Doc Milnamo said...


You ended with, "One can only hope the market rewards them"

Yes indeed. And by extension, rewards the stockholders!


Gigs said...

Ford is just following the model the airlines pioneered. Every few years they wipe out all the equity holders by giving new stock to the next round of employees and bond holders who secured excessive compensation packages or short term returns the company couldn't support. The industry still hasn’t found a way to avoid losing more money in a bad year than the cumulative profits earned in the history of commercial aviation. It isn't clear Ford has done anything to materially change a flawed business model. On the other hand, bankruptcy is tough love. GM is being forced to eliminate unprofitable brands, will be allowed to exit onerous dealer franchise agreements, and finally free themselves from all the union contracts that provided excessive benefits and wages relative to all their competitors. Ford comparatively appears to be putting lipstick on a pig. To call a spade a spade, that hail-mary pass is essentially the only shot the Ford family has to come out of this with something other than nothing and still be allowed to keep an office in the building. The paths these companies have taken are notably different. One company gained the leverage to deal with entrenched stakeholders and secured the flexibility to reinvent the business model. The other one may have won some concessions but is still living with the inlaws.

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