By on June 26, 2009

Do we really want to have this debate again? You know, the one where Detroit’s defenders claim that federal “loans” are loans not bailout bucks? I guess so. After all, the MSM has been all about Ford being the only domestic not to receive a federal bailout. And now we hear that The Blue Oval Boys have landed a $5.9 billion dollar retooling loan from the Department of Energy. As expected. “Our business plan assumed about the amount we got,” FoMoCo CEO Alan Mulally told Reuters. “It’s very consistent with our plan.” Automotive News [sub] reports that Ford. Wants. More.

Mulally said Ford could be in line for more funding from the Energy Department program. The agency has $17 billion in additional funding for loans to auto companies and congressional allies of the auto industry are backing efforts to allocate another $25 billion.

A greenhouse emissions bill pending in Congress would double that amount to $50 billion. [Story coming.] Ford’s original total request was $11 billion.

Let’s review: Under the terms of the loans, Ford can use the $5.1 billion to pay for up to 80 percent of the cost of retooling an American plant to build vehicles that are at least 25 percent more efficient than the ones that were previous assembled at the facility. We’re talking about a 25-year loan. The interest rate: four percent. That particular piece of taxpayer generosity saves Ford a projected $100 million per $1 billion borrowed (compared with normal market rates, which they probably couldn’t get). Oh, and the DOE can make that a zero percent interest deal for the first three years, if need be.

Need be. Whether you view this DOE loan as a hand-out or a hand, one thing’s clear: Ford’s burning cash. Unless the market recovers, they are in no better shape financially (product’s a different story) than GM or Chrysler. Worse, actually, as they don’t get to wipe the slate clean.

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20 Comments on “Ford Loves Them Some Federal Loans: Looking for Another $5.1 Billion DOE Loan...”


  • avatar
    rnc

    Funny I have yet to see the posts about Nissan taking the gov. bailout. These are loans from a program that developed before the bottom fell out, available to any solvent automaker whether domstic or foreign (yes ford is solvent, I get sick of hearing about how Ford just borrowed at the right time, what about all of the assets that GM sold and all of the bonds issued just to fund liabilities and keep the lights on during the last ten years?) As Buffet said there comes a time when we find out who’s been swimming naked, what we found out was how bad GM’s financial positiion was in comparison to Ford’s, since probably the late 80’s that had just been hidden and pushed out despite for years how msm went on and on how GM was the one who would make it.

  • avatar
    Droid800

    What would you rather have; Ford borrowing $11 billion to build fuel-efficient cars that people actually want, or GM taking at least $50 billion to continue to build crap that is below market-standards and designed by the group-think of the PTFOA.

  • avatar
    RobertSD

    I just want a friendly reminder that every automaker is eligible for those loans. Doesn’t matter which country you originate in as long as you have US factories that will start producing vehicles 25% more efficient. Toyota, Honda, Nissan, BMW, Mercedes, Hyundai, etc… I’m sure Ford’s not the only one wondering how they can take advantage of the government’s generosity.

  • avatar
    mattstairs

    Are these loans available to any manufacturer building cars in the US (i.e. transplants)?

    So it sounds like FoMoCo can just retool a truck/suv plant into a plant building conventional Foci and use the loan. (I think they may have announced one of these already?)

    I suppose one could argue that since the FedGov is mandating what type of fleet that can be made/sold via CAFE, the least they can do is provide some low-cost financing to help with the transition.

    Of course, the simplest/best solution to imported oil, pollution, carbon, etc. is just to raise the gas tax, but that’s too politically difficult, so instead we get the inefficient regulatory solution.

  • avatar
    rockit

    Nissan and Tesla got money as well, just not as much. However I still see $1.6 Billion and 465 million as large sums.

  • avatar
    tparkit

    Another brand to boycott. That 25-year loan term strikes me as a device for taking this “loan” – especially Ford’s ability (and need) to repay it – off the public’s political radar.

  • avatar
    Gardiner Westbound

    Bailout, the word that dare not speak its name.

  • avatar
    bozwood

    rnc,

    I am just curious, are you using some type of government accounting that counts negative equity as solvent?

  • avatar
    jfsvo

    Let’s see… Billions of dollars in low interest loans for doing what whey would have done anyway. My only question is why Toyota and Honda didn’t get in on the action like Ford and Nissan.

    RF – Are you suggesting Ford not take the free money? Did you tear up your “stimulus” check last year?

  • avatar
    rnc

    I am refering to solvent as the ability to operate without court protection, i.e., IBM would be a great example of a similarly sized corporation that found itself in the same situation.

    And I am an accountant by profession, there’s the wonderful world of intangible assets, I think you would be amazed at how many corporations would be insolvent (by your def.) if not for those wonderful things, example being banks definition of assets determine how they are valuated. With Ford I would imagine that Volvo is valued at much less than they actually could, one to take a tax offset in years when they were profitable (not many recently) and two to show a gain when they sell it.

    assets = liabilities + equity does not equate to what it should.

  • avatar
    guyincognito

    Ford should be careful here. They may think they’ve found a way around the meddling of the PTFOA but somehow I think these “loans” will come with more strings than previously advertised.

  • avatar
    rnc

    And I am not saying that Ford’s situation is not precarious. But it is amazing what they have pulled off in the last three years and I am pulling for them, if they pull it off (and I believe that they will as I own the stock) it will be one of the greatest turn arounds in modern business history comparable to Apple. They have the leadership, the plan (everyday I see more and more fusions, flex’s and edge’s, these are the cars that have to move the truck part will be there) and at this point the faith of the banks and bond holders as one is refinancing at lower rates and the others are willing to trade for stock.

  • avatar
    derm81

    Wasn’t this expected for a while now? Why are people acting shocked? Ok, so will people now boycott Ford, Nissan, and Tesla for this?

  • avatar
    The Walking Eye

    Another brand to boycott. That 25-year loan term strikes me as a device for taking this “loan” – especially Ford’s ability (and need) to repay it – off the public’s political radar.

    Are you going to boycott Toyota and Honda if they get money from the Japanese government?
    http://www.autoblog.com/tag/honda+government+loan/

    Will you be boycotting Nissan and Tesla too for their DOE loans?

    How about BMW, Porsche, VW if they go through?
    http://www.chinapost.com.tw/business/europe/2009/05/18/208596/Germanys-Porsche.htm

    So that means you’re boycotting Chevy, Pontiac, Buick, GMC, Cadillac, Opel, Chrysler, Dodge, Jeep, Tesla, Nissan, Infiniti, Toyota, Lexus, Hummer, Opel, Porsche, BMW, VW, Fiat, Renault…am I missing any? That leaves Ferrari and TATA? Have fun in your Nano.

    Yeah, I’m being facetious, but enough with the reactionism and what seems to be near blindedness on hating any American auto maker.

    Also, are you privy to Ford’s books and know for a fact that they’re insolvent and will never pay this back? I don’t know if they will, but I’m giving the due diligence that the DOE did the benefit of the doubt. Is the doubt about this some deep seeded conspiracy theory that the gov’t is gonna buy up everything all secret like or that “Uncle Obama” (hey, that’s some nice veiled racism there!) is secretly trying to give Ford money?

  • avatar
    johnthacker

    Are you going to boycott Toyota and Honda if they get money from the Japanese government?

    No, you see, that would be Japanese taxpayers handing free money to us. That’s much less upsetting that our government handing our money away. Stupid for the Japanese, but if they want to send us free money…

    People have such a weird understanding of trade.

  • avatar
    bozwood

    rnc,

    sorry, but I don’t know of many non-financial companies that hold intangible assets greater than equity.

    so, solvent in your world means negative equity being propped by below market 25 yr “loans” that allow a company to operate without protection from a BK court? ok, I think I am clear now.

  • avatar
    johnthacker

    I don’t know if they will, but I’m giving the due diligence that the DOE did the benefit of the doubt.

    Perhaps. We have CBO estimates just released on TARP. Graphical analysis here. You can see that the CBO predicts that the biggest amount of money lost in TARP is going to be the foreclosure mitigation money (not yet paid out), following quickly by the money to the auto manufacturers, then AIG. Considering the relatively small amount of money given to the auto manufacturers, it’s a really bad rate of loss.

    The current estimate losses from TARP are dwarfed by the non-TARP bailout of Fannie and Freddie, though.

  • avatar
    davejay

    Ok, so will people now boycott Ford, Nissan, and Tesla for this?

    Personally I’ll just keep on owning stock in Ford, driving a Nissan, and wishing I was driving a Tesla.

  • avatar
    King Bojack

    You could help your Ford shares by buying a Ford. Seems to be fairly self serving in a good way.

  • avatar
    rnc

    bozwood :

    I worked for a non-financial company were all of our positive net equity was represented by the goodwill associated with the name of a company we acquired. Do you have thier Audited Statements by the way? And I mean a $2 Billion/year company.


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