Ford bails out of bailout
The heads of Ford have stepped out of the plan for the auto industry bailout, saying they don't need the money. But why was Ford able to jump ship and not GM or Chrysler? Dan Grech explores a critical company move.
Ford headquarters in Dearborn, Michigan (Bill Pugliano/Getty Images)
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Scott Jagow: By the end of the day, we could have a vote in Congress on the automaker loans. But the people who run Ford say they don't need the money. They've bailed out of the bailout. Ford says it can pull itself up by its own bootstraps. What we want to know is why is Ford able to say this, but GM and Chrysler cannot? Marketplace's Dan Grech looked into it.
Dan Grech: Ford's sales have tanked, its buyers have gone foreign, the company's bleeding billions.
But David Cole at the Center for Automotive Research says Ford made a critical move back in 2006, when loans were plentiful and cheap. The company set up a $23 billion credit line.
David Cole: They said to their creditors at that time, "You can own the company, but we need the money." That right now is a very important asset that Ford has without dipping into a federal loan at this point.
In the last three years, Ford has closed factories, eliminated 50,000 jobs, and sold off Jaguar, Land Rover and Aston Martin. Still, Cole says Ford is fragile.
Cole: They may not be in the loan, but if there's a failure of major competitors, because of the failure then of the supply structure to the industry, their world ends as well.
Ford's focusing on becoming a leader in hybrid powertrains -- and eventually, electric cars.
I'm Dan Grech for Marketplace.
Comments
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From keyport, NJ, 02/15/2009
I don�t believe that the government should give bailouts to these very well fortune and greed auto companies. Their CEO�s make more than enough money to bailout their own company. Be size the taxpayers are the ones who are going to be paying for their debt. Instead, the government should be bailing out us the consumers. They should give each of us a twenty thousand dollar check, so we can have money to spend and save the economy from this crisis. However, I don�t mean a two hundred stimulus check that�s going to pay off one bill, but enough money that can be recycle back into the economy. Unfortunately, even if the government decided to bailout these companies consumer still don�t have the money to spend to, to buy the cars.
From Washington, DC, 12/11/2008
Good for Ford, but can they stay out of the bailout? It's like the ole Mark Twain line about today's problem with politicians -- they won't stay bought! It seems that this corporate welfare effort is duplicative of the financial welfare scheme. Treasury is not the backstop of the financial market. You and I are but not as tax payers; we're the credit users. We need to curb our appetite for easy cash. Recently my wife was telling me about a $900 blazer at Nordstom's and I realized that it's only because of cheap credit that such a purchase opportunity would exist. Who needs a $900 blazer but a clutton!
From Arnprior, ON, 12/10/2008
Ford has chosen to freeze out GM and Chrysler. When the thaw comes, Ford will have survived. It's the chance of two centuries.
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