Bill Ford speaks re bailout

[djs]

From Bloomberg today.



May 20 (Bloomberg) -- Ford Motor Co. Executive Chairman Bill Ford, great-grandson of the company’s founder, said it is in the national interest that the automaker keep operating without federal aid.

“It’s in the country’s interest that Ford remain free of taxpayer money,” Ford said yesterday in an interview in his Dearborn, Michigan, office overlooking the 2,000-acre Rouge factory complex built by Henry Ford. “Anything we can do to minimize the amount of taxpayer money going into the private sector is probably a good thing.”

Ford, 52, said he has talked with members of the Obama administration to ensure the company isn’t hurt by being the only U.S. automaker to forgo federal funds. Chrysler LLC is restructuring in a U.S.-backed bankruptcy, and General Motors Corp. probably also will end up in Chapter 11 by June 1.

The discussions are aimed at “not being disadvantaged from the fact that we’re an independent company, not taking taxpayer money,” Ford said. “That’s in the national interest that that happens.”

His comments reinforced the company’s efforts to distance itself from Chrysler and GM, which received $19.4 billion in emergency loans to stave off collapse. While those automakers restructure in and out of court, Ford Motor has been showcasing projects such as factory investments to support new small cars.

Ford Motor’s strategy on a bailout evolved throughout late 2008, Ford said.

‘Go It Alone’

On Dec. 2, Chief Executive Officer Alan Mulally testified to Congress with the CEOs of GM and Chrysler and appealed for a $9 billion credit line. Within weeks, the second-largest U.S. automaker reversed the decision after deciding it had the cash to “go it alone,” said Ford, who served CEO before he hired Mulally in 2006.

“When we started seeing what the restrictions of taking government money would mean to our ability to operate quickly and strategically, we felt that wasn’t a position we wanted to be in,” Ford said. “We felt we could pull ourselves up by our bootstraps and make it on our own.”

While Ford Motor lost a record $14.7 billion in 2008 and remains at risk from the worst U.S. auto market in 27 years, it’s getting a public-image boost for not taking government aid, said Efraim Levy, a Standard & Poor’s equity analyst.

“Ford is benefiting from its independence,” said Levy, who is based in New York and advises holding the shares. “Consumers don’t resent them for taking their tax dollars to stay alive.”

Mulally’s Gambit

Mulally’s borrowing of $23 billion in late 2006, with all the company’s major assets pledged as collateral, positioned Ford Motor to shun a rescue, Levy said.

“Ford was fortunate enough to get those loans in advance of the credit markets freezing up,” he said. “Take away that liquidity, and Ford would be in the same boat as the other two.”

Ford Motor has more than doubled this year in New York Stock Exchange composite trading as it cut debt by $9.9 billion and won concessions from the United Auto Workers to pare annual labor costs by $500 million. The shares fell 7 cents, or 1.2 percent, to $5.56 at 11:45 a.m. in New York.

Bonds for Ford Motor’s lending arm, Ford Motor Credit, rallied today. Ford Credit’s 7 percent notes due October 2013 rose 3.3 cents to 81.1 cents on the dollar, the highest since June, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 12.8 percent.

With $21.3 billion in automotive cash at the end of March, Ford Motor is now working to add new, fuel-efficient models and retool factories to wean itself from dependence on fuel-thirsty trucks.

Opportunity, Caution

“This is a time of real opportunity for us, but also some real cautions as well,” Ford said. “We are spending a lot of time trying to figure out what this all means to us.”

Among the risks are lower costs and better financing for GM and Chrysler from a U.S.-backed restructuring, said Brian Johnson, a Chicago-based Barclays Capital analyst. He rates Ford as “underweight.”

More funding for those automakers and their credit arms would increase “their ability to offer discount financing and subsidize price wars,” Johnson said. “It will certainly put pressure on Ford’s strategy to improve their retail prices.”

Ford said the automaker is improving its prospects with new models like the Fiesta subcompact car coming from Europe and the Fusion hybrid, along with two battery-powered autos coming in the next two years and a plug-in hybrid due in 2012.

‘Competitive Position’

“I really like our competitive position,” Ford said. “Having said that, we are still speaking with the government to say, where possible, ‘Please don’t disadvantage us.’”

Besides his own contacts with administration officials, company executives talk frequently with President Barack Obama’s autos task force, Ford said.

He said he was pleased shareholders rejected a proposal at the May 14 annual meeting to strip Ford family members of a special class of stock that gives them 40 percent voting control of the 105-year-old company. Bill Ford and his cousin, Edsel Ford II, are directors.

“I would hope that shareholders would see that our interests are aligned with theirs,” Ford said. “It’s more than just a financial investment, it’s an emotional investment. It’s pride. I mean, our name is on the product. If it was just a financial investment, the family probably would have been out years and years ago.”

To contact the reporter on this story: Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

[ChipBeck]

May 20 (Bloomberg) -- Ford Motor Co. Executive Chairman Bill Ford, great-grandson of the company’s founder, said....“It’s more than just a financial investment, it’s an emotional investment. It’s pride.

Mr. Ford,

There still remains in America today, a large number of us who value our freedom more than any government benefit, our independence more than the false security of collectivism, and who seek opportunity but never entitlement. We know that the history of the Ford Motor Company parallels the history of the United States of America and that it was the same capitalist values, principles, pride, and dedication that took both institutions to great heights. Your efforts and those of your entire organization are a source of great pride for millions of Americans like me. Whether I'm driving a truck, a car, or a high-performance supercar, the Ford blue oval stares back at me from the center of the steering wheel. I buy nothing but Ford cars and trucks and have steered many of my friends into buying their next vehicle from America's last independent automaker.

For us, buying a new Ford, is also a matter of pride. God bless America.

Chip

[gtinmyblood]

Amen.

[FM99]

Well said, Chip!

[PL510*Jeff]

:usa:agree:

[GTJack]

Chip
Thank you. Your response was very well crafted and spoke volumes for many of us that cherish the freedoms and opportunities we have, and want to keep.

[THamonGT]

Right On Chip. I too am very HIGH on Ford Motor Co. and I am putting my money on them and America. Tomy Hamon

[S592R]

Chip .. :thumbsup:thumbsup

[Not 4N]

Thank you Chip :thumbsup
From a member who rebuilt thier first 390 in a '67 LTD at the age of 15 to my current inventory of over a dozen Fords I am very proud to say I bleed Ford Blue.
I was able to gauge the importance of a statement like this at R3 when I said this to Andy and he shook my hand and said thank you. He is now retired from Ford and I couldn't think of a more reputable place to invest my career.
We are faced with alot of choices in the automotive world and I am proud to say the choice I made over 30 years ago is leading the pack on this continent and taking on any of the challenges from overseas.

Trent

[Stef]

Thank you Chip, I am right with you.
I also bleed FORD blue.:thumbsup:thumbsup

[Shadowman]

Chip I like what you shared as do I the fact that Ford willing and committed to going forward using conventional means rather than creating a government partnership.

I truly hope that they can do so and yet sadly see undermining being one of the by-products of the partnerships between Chrysler and what sounds like; soon to be General Motors.

From an individual the words flow easy and the truth, honestly, and commitment can be heard and felt and yet when you put a group together the saying is; “no group conscience” which sadly has been evidenced over and over throughout all sectors of life.

I think that in the end there is going to be great pressure placed on Ford and it will take far more than a personal desire for them to go it alone but rather a country that wakes up and recognizes the value of personal commitment and the resulting achievement that comes as the direct result of personal/team efforts and not as the result of someone; in the case the government i.e. you and I simply artificially filling their coffers so they can stay afloat.

Certainly I would like to have all companies succeed and for everyone to prosper however only if based on equitable distribution of the wealth; meaning that the profits (key word profits) are derived as the result of a quality product and or service being competitively marketed are then shared with those that make this possible. However if the company either cannot or does not offer a quality product or service competitively within a given marketplace then sadly they will fail and to this I share little sorrow. This scenario plays out in one’s personal household as well; if you live by your means then you will do fine however if one lives off of OPM (other people’s money) sooner or later the house of card will fall and again to this I share little sorrow.

We have created a country IMO in which what one has is far less important when compared to what one has access to. We no longer recognize and encourage success but rather we ostracized folks for just such results using phrases such as that is not fair, why not me, or he/she had it given to them.

Then add to this we have states with a large percentage of their fiscal budget based on the revenues received from Lottery ticket sales; WTF is this all about; IMO it is phenomenal that the elected officials encourage the proverbial “bugs being drawn to the light” and then they wonder why they got zapped. Incidentally these are the same states that when it comes to the end of the year the various departments have to make darn certain to have spent every nickel in their budget or they will lose it the following year; hum now this sure sounds to me like a system that encourages savings and efficiency; not.

Now sadly IMO the situation within some of the automakers is no exception; failing to have access to free money they would have had to truly restructure or close. By giving them the/our free money (money that as a country we do not have) we effectively said; it remains business as usual however be careful how you present the cards that you are playing to the public because what we doing for you is more a stop gap and a thank you for helping this team get hold of the White House when compared to a viable fix because IMO there are simply far too many people in the meeting room at any given time that as the result in their silly little world collectively they believe that given enough time it will all be fine again; this sounds like delusions of grandeur to me.

Now there is no doubt that within their little sheltered world it is and will be just fine because the last time that I checked their salaries, medical benefits, retirement benefits, the “phenomenal” perks, etc. all remain in place. They live in a bubble that does not mirror the world that I/we live it.

So; can Ford pull it off? I truly hope so for far more reasons than just the survival of an independent Ford. Now as for those using OPM (other people’s money) mine/ours they never asked me and frankly I do not support it as such I would not be bothered if they went the way of many other’s such as Hudson, Willy’s Overland, etc..

Having shared this do I feel bad for all of the folks that are adversely affected when a company truly reorganizes and or closes; absolutley however I do not feel responsible; there is a huge difference. One's ability IMO to know when to turn the lights off is just as important maybe even more so when compared to one knowing when it is viable to turn them on; this is considered by many as a fundemental component of running a business when compared to simply watching it run. Which sadly in the case of some of the above mentioned bussiness was into the proverbial ground.

Sorry to rant within your thread “djs”

Shadowman

[fjpikul]

OK, so now it's "PhilosophyMan?" That's the longest post you've ever had.

[PL510*Jeff]

OK, so now it's "PhilosophyMan?" That's the longest post you've ever had.


Maybe Indy GT can translate this missive- in 1,000 words or less.

[PeakCompletions]

I have 125 pickups in my company... only 2 fords in the whole bunch.... I can tell you as about 30% of my fleet will be traded in over the next year I will be ordering nothing but Fords.

Thank you Chip for your great response.

[Kingman]

Perhaps someone can tell me how will closing dealerships reduce Chrysler’s cost or improve sales? I just don’t get it.

[DB4-12K]

Perhaps someone can tell me how will closing dealerships reduce Chrysler’s cost or improve sales? I just don’t get it.

A whole boatload of their dealerships lose money per car right now. Besides the structural costs associated with training, certifying blah blah blah the dealers, the fact is they sell vastly fewer cars per dealership than the competition, and when you've got 4 Chrysler dealerships selling the same amount 1 Toyota dealer does, you end up with 4 dealers in a nuclear arms race to see who can give away new cars the fastest, eroding brand perception and resale value. When you can get a new Ram 12k off sticker, leaving razor thin (if any) margins, that can't be good.

At least that would be my view. Even cutting 800 dealers, they'll still have 2,200. That's alot of dealers for a company that will undoubtedly continue to have its share eroded. This is to say nothing of the unfair and illegal manner in which they are culling specific franchises.

[RALPHIE]

Somewhere I read that a Ford dealer's biggest competition is his closest Ford dealer. I assume that is probably true for Chrysler also - so shutting down these outlets will probably help the remaining ones.

[Indy GT]

Maybe Indy GT can translate this missive- in 1,000 words or less.

Ok Jeff, I will try.

I agree in principal with what Bill has posted.
Too many people think they are "entitled" to whatever they want.
Watch TV ads hocking this mentality. It is everywhere. And it is wrong.
I am sorry if you make $52K annually, you are NOT entitled to engage in a mortgage on a $600K house. It just will not work!

Similarly I see in the news that California is now broke and will be trying to belly up to the DC feeding trough for bailout money too. The taxes our GT owners must pay to live in this Shangri-La state are legendary. Gasoline prices, registration fees, CARB restrictions, housing prices (at least in the past), electricity costs, etc. are all higher and more stringent than other states. The state government has been unsuccessful in funding these green initiatives through their captive citizenship and so now they will ask all other non-resident US taxpayers to help them fund their shortfalls. Sorry, you want green things, and a myriad of state offered services for your constituents, you figure a way to fund them within your state.

Not much else to say. I appreciate the philosophical posts of both Chip and Bill very much. And I think they represent a large swath of mainstream USA.

[PL510*Jeff]

Thanks Indy - I concur, wholeheartedly.

I believe that those that "feel entitled", actually have been misled and bamboozled by all the various media outlets have provided them.

The balance between right/wrong - fair/just - good/bad has disappeared from a large part of American society.

Wish it wasn't so.

[THamonGT]

Yes, The closest competitor is the Dealer down the street that sells the same product as you do and not the Dealer selling other brands. For 51 years I delt with "that Dealer down the street", as often I would sell a vehicle at a loss just to keep him from taking my customer with hopes of making a profit on the next one. I'm glad I'm out of that mess! Tomy Hamon a proud retired Dealer.

[ChipBeck]

Perhaps someone can tell me how will closing dealerships reduce Chrysler’s cost or improve sales? I just don’t get it.


A whole boatload of dealerships lose money per car right now. Besides the structural costs associated with training, certifying blah blah blah the dealers, the fact is they sell vastly fewer cars per dealership than the competition, and when you've got 4 Chrysler dealerships selling the same amount 1 Toyota dealer does....Even cutting 800 dealers, they'll still have 2,200......This is to say nothing of the unfair and illegal manner in which they are culling specific franchises.

According to Chip Beck, for any information to become actionable it must first pass through two filters. Failure on either count renders that information useless. Those two filters are, 1. Is the information true? and 2. Is the information relevant?

Gentlemen,

Kingman instinctively knows that culling dealer franchises will neither reduce Chrysler's costs significantly nor will it improve sales. The immediate effect of this move will be a significant reduction in Chrysler new vehicle sales. As a General Motors dealer myself for over 20 years (Pontiac and GMC Truck) I feel qualified to speak here. The excessive number of domestic dealerships that exist today is not a cause of manufacturer woes, it is a symptom. DBK is correct in stating that the average Toyota dealership sells more than 400% the number of cars sold by the average Chrysler dealership. Then again, the average Chrysler dealership sells 400% as many cars as the average Porsche dealership. Yet over the last decade the Porsche and Toyota dealers were far more profitable than Chrysler dealers. In this game, volume, in and of itself, is of limited value. Unless a manufacturers products generate demand in excess of available supply, profit margins will be thin or nonexistent.

The volume of new cars sold per month disparity between Chrysler and Toyota dealerships is unquestionably true. But as to the survival and profitability of Chrysler, it is in large part, irrelevant.

In the late 1970s my Pontiac dealership sold four times as many cars as the Honda automobile dealership across the street. Yet the Honda dealer made four times as much money every month as I was able to make. He had pre-sold every Honda he could get and delivered everyone of them at full list price the day they came off the transport truck. He could care less that his volume was only one fourth of my volume. The Honda Automobile was perceived to be a better car at a better price and demand exceeded the available supply. This made Honda dealers extremely wealthy.

There are very small marginal costs to automobile manufacturers that have to service a large number of dealerships, administering warrantee claims, etc. But the larger argument being made here, is that because a typical Toyota dealership sells 300 new Toyota's a month, he is able to maintain a palacial showroom with a kids play area, a Starbucks, a fantastic deli lunch counter, and a customer service waiting area filled with flatscreen plasma TVs. The dumpy little Chrysler dealership down the street moving 50 units a month looks dark and dingy by comparison.

So all Chrysler needs to do is eliminate 75% of their dealerships and they will sell the same number of cars through 1/4 the number of dealerships right? And then the Chrysler dealerships will have the Starbucks and the flat screens and all that other good stuff right? And then customers will see how bitchen' the new dealerships are and Chrysler will be just as profitable as Toyota right?

You already know the answer to those questions. This is as absurd as Chrysler looking at the differences between their advertising and the advertising that Toyota does and believing that if they just do the exact same advertising as Toyota that they will be as successful as Toyota.

Those palacial new Toyota showrooms are also not the cause of Toyota's success. They too, are a symptom....brought about by the profitability resulting from Toyota's combination of desirability and price point.

When it comes to automobile manufacturing, customers are looking for the best available product they can acquire for the amount of money they're willing to spend. You don't need to make the best car, but you do need to make a car that significant number of customers will consider to be the best available for $20,000 or $28,000 or ??? and that number of customers must exceed the available supply in order for the dealers to make a reasonable profit on them.

If a manufacturer is not building the most desirable product at a given price point he can still sell a large number of vehicles because of customer loyalty. And often that loyalty is not to the brand, but to a particular dealership. When Tomy Hamon and I sold our stores after decades in the business, we both had a large number of customers who would only buy automobiles and trucks from us. If we didn't sell it, they didn't buy it. Our friends in the Country Club, our business associates, and customers we built close personal relationships with after doing business with them for decades. Once we got out of the car business, our loyal customers scattered to many different brands and many different dealerships. And this is what is going to sting Chrysler.

Closing dealerships will benefit the dealerships that remain, but it will hurt Chrysler. Many customers will have to travel farther to get their cars serviced, and many areas will be left without any Chrysler dealership. Those dealerships that remain are in no financial position to build new facilities that would rival those of the typical Toyota dealership. The notion that fewer dealerships will lead to more success for Chrysler as a manufacturer is a red herring and distracts their attention from the only two items they should be focusing on right now. 1. Improved product. 2. Lower price point.

DBK touched on one very profound thing in the last line of his post. The unfair and illegal manner in which they are culling these franchisees. Both Chrysler and the government "Car Czar" controlling Chrysler refuses to make public the criteria they are using to select dealers to be eliminated. It has become crystal clear they are not using individual profitability or effectiveness in their assigned market areas. It does appear that both race and political affiliation are affecting which dealers are selected for elimination. Many of the weakest and least effective dealers are being allowed to continue in operation because they are owned by minorities while stronger, more profitable, higher volume dealerships who have been in business for decades but are owned by white males are being eliminated.

Capitalism is the ultimate form of power to the people because each of us get to vote with our dollars and collectively we determine which businesses survive. Socialism strips that power from consumers and places it in the hands of the small number of bureaucrats who use their personal and political bias to select winners and losers. I barely recognize my country today.

Chip

[Shadowman]

Ok Jeff, I will try.

I agree in principal with what Bill has posted.
Too many people think they are "entitled" to whatever they want.
Watch TV ads hocking this mentality. It is everywhere. And it is wrong.
I am sorry if you make $52K annually, you are NOT entitled to engage in a mortgage on a $600K house. It just will not work!

Similarly I see in the news that California is now broke and will be trying to belly up to the DC feeding trough for bailout money too. The taxes our GT owners must pay to live in this Shangri-La state are legendary. Gasoline prices, registration fees, CARB restrictions, housing prices (at least in the past), electricity costs, etc. are all higher and more stringent than other states. The state government has been unsuccessful in funding these green initiatives through their captive citizenship and so now they will ask all other non-resident US taxpayers to help them fund their shortfalls. Sorry, you want green things, and a myriad of state offered services for your constituents, you figure a way to fund them within your state.

Not much else to say. I appreciate the philosophical posts of both Chip and Bill very much. And I think they represent a large swath of mainstream USA.


Thank you and for CA residence as of the 19th the vehicle registration just doubled and then carry the less than stellar news across the border and GM just selected 290 dealers and told them that they have until October after which they are no more; this out of a delaer base in the country of 750ish.

This is a very big storm; one that many have "yet" to experience first hand.

All the best

Shadowman